Rising cost of raw materials — forging strategies to address its impact

Volatile and unstable global markets have widespread implications for manufacturing organizations. From rising energy costs to unexpected fluctuations in raw material costs, unforeseen obstacles are destabilizing supply chains and making it difficult for manufacturers to remain in the black. With supplies of many raw materials becoming harder to secure, commodity price volatility may not be just a temporary phenomenon, and it is up to manufacturers to either absorb additional costs, find new ways to mitigate the expenses, or pass price increases along to customers who are already reluctant to spend.

Organizations that resort to a policy of waiting for processes to normalize are setting themselves up for inevitable failure, while those that adapt and adjust to new market conditions grow stronger and more profitable. Manufacturers must move from today’s linear economy, where they mine, manufacture, use and throw away, towards a more ‘circular economy’, where one industry’s waste becomes another’s raw material. Collaboration with suppliers and customers can keep used products, components and materials in circulation, while new business models that rethink ownership can shift value along such a supply circle. For instance, some companies have even begun to pioneer new business models that enable them to retain ownership of the materials used in the products they sell. By following a systematic approach that focuses attention on resources throughout the value chain, manufacturers can exploit a broader landscape of opportunity than they initially thought possible.