Skimpflation

As inflation is impacting the prices of products, many organizations are looking for ways to cut costs. One such approach previously examined by OM in the News is the concept of shrinkflation, when companies reduce the size of the product. In many cases, customers don’t notice the change is size.

Now, instead of reducing the size of the product, some companies are changing the ingredients, choosing cheaper alternatives. This approach is being referred to as skimpflation.

One example of skimpflation: Conagra’s Smart Balance® spread. Conagra reduced the oil content from 64% to 39%, replacing much of the oil with water. The company may have gone too far, as many customers complained about the new formula, and Conagra is going back to the old formula.

Another example is Scott’s 1,000 sheet role of toilet paper. Although still 1,000 sheets, people are reporting that it is 20% lighter than older packages. The toilet paper feels thinner — and is thinner.

Many organizations in the service industry have cut back on what they offer the customer as well. One of the more common is reduction in daily housekeeping services at hotels.

Video Spotlight:  

• Skimpflation: What is it? Why are watchdogs telling people to look out for it? (Sep 29, 2022, Fox 26 Houston)

This post is based on the CBS News article, The Flip Side of Inflation: “Skimpflation” is Hitting Everything from Food to Hotels, by Aimee Picchi, October 4, 2022, and the YouTube video in the Spotlight. Image source: Lightspring/Shutterstock

Discussion Questions:

1.  Why change ingredients?

Guidance: There are many reasons to change product formulations, and it is not uncommon. During COVID, shortages caused changes. Companies may also change their products to improve safety, improve performance, to be greener, or to reduce costs.

However, during this time of inflation, companies are avoiding price increases, and one way to keep the price lower is to reduce it costs. Cheaper ingredients are one such approach.

2. How does skimpflation affect quality management?

Guidance: Many customers may not notice the difference in product ingredients when purchasing the product at the store. However, as was the case with Smart Balance, they might notice it during consumption, or realize it later. At that point, the customer may feel cheated.

3. What is the impact of skimpflation on operations?

Guidance: Changing the product design can have an impact throughout a company’s supply chain.

It begins with the production process. Depending on the changes to the bill of materials and product design, the production process may require substantial changes. This could include retraining workers, or new equipment.

There is also an impact on the supply chain as the needs for various items is changed. Depending on the replacement used, new suppliers might be needed. It would impact inventory management as well.