The past few years have seen the rise in prices of almost all commodities. This is largely due to the volatility in the raw materials market. Over the past few years the price change in consumer products has doubled, with goods such as milk and wheat making homes re-evaluate how much they should consume and spend on their food. As for industrial raw materials, crude oil has perhaps been the most stressing. Aluminium and steel have also seen sharp gains. These gains are not only seeing manufacturers transfer the costly burden onto consumers but it’s also making major manufacturing companies cut down on their number of employees.
Supply chain volatility is basically an issue of supply and demand. With supply being less than demand, scarcity is leading to an increment in prices all over the world. An increasing need for raw materials is seeing the depletion of natural resources and reserves. This is because more volumes certain products are needed. Technology is one of the major causes of the dwindling of resources. The need for electronic gadgets is not just evident in the developed world but in developing countries too. The demand for TVs, computers and mobile gadgets has more than doubled over the past decade and manufacturers are going out their comfort zone to find a supply chain that will meet their long term needs.
Volatility in the Raw Material Industry
One sure way to know that raw material supply chain is under pressure is by the lack of harmony in the prices of goods. This is opening up a market for products that are cheaper in quality. However, even countries that are wholesale producers of goods are feeling the pressure as countries such as China are also facing a shortage in raw materials. Though some materials have substitutions which are equal or at least acceptable in value and quality, others still remain irreplaceable. Major consequences in terms of price, quality and availability of goods are bound to be seen if the insufficient number of materials continues to plague our global industries. The standards of living we enjoy will be difficult to maintain if this trend continues.
So what can be done to maintain a healthy supply of materials and stop price volatility?
Recycling: Recycling is going to be one of the key habits consumers and manufactures will have to adopt. If our need for manufactured products is to be met over the coming years, aggressive recycling campaigns are needed.
Substitute Materials: Products that can be made using alternative materials will have to be produced to curb demand. Clever ways can be implemented into the manufacturing process to produce goods that require less energy and materials.
Supply chain volatility will only be curbed if the supply of raw materials meets demand. The problem can only get worse if tough measures are not put in place. Though not easy, this can be achieved by:
Recycling: This is useful in making raw materials available again. Though there are countries which have embraced recycling, many are still lagging behind. It is a great waste to throw away products that can be easily recycled.
New manufacturing methods: Innovations on new ways to manufacture goods are coming up. The materials used in manufacturing can also be substituted to curb the lack of raw materials.
Protection of reserves: Stringent measures must be taken to protect natural reserves from depleting.