Keeping up with the raw material crisis
As previously discussed in the last blog post the current raw materials crisis is sweeping across the world, especially companies and their supply chains have to deal with longer waiting times and increased prices during this uncertain time. Reasons such as global demand, transport shortages or political changes in trade that have created such a scenario were closely examined in the last blog post and need to be understood for companies operating in this market to withstand this crisis.
Besides these factors, each company is dealing differently with this unclear situation, and due to the shortage in the entire commodity market, supply chain managers in particular have to come up with new ideas and tactics to meet this increasing demand. As a result, most companies are starting to plan more into the future, even though uncertainties remain, particularly in terms of working with their suppliers, so they are trying to build deeper relationships with longstanding attractive offerings to create security for both parties. These attractive offers may include an extension of the cooperation with the supplier, a purchase with larger quantities or an increased purchase price in order to reduce waiting times.
Whereas other companies rely more on flexibility to adapt to the current situation and demand, using monthly or even bi-weekly pricing models. Compared to a more long-term model, this one offers more adaptability in case of strong price fluctuations or waiting times in the supply chain, be it packaging, raw materials or transport. In the context of flexibility, companies trading with raw materials try to spread their risk as much as possible, because the global shortage tempts suppliers who have the higher leverage to cancel orders. For this reason, materials that are particularly in danger during the current crisis should be procured from at least two suppliers with a quota agreement in order to greatly minimise the possible risk.
Summing up, measures such as the ones mentioned above and openness to new tactics need to be present within the company, especially during this time of crisis, to ensure the best possible outcome and satisfied customers. As well as having the right people in the right place, every company needs to have qualified candidates to fill their most important positions to manage this crisis. If this is not the case and your company struggles to fill positions with the best candidates, please contact us.