Yes, raw materials shortages can really hurt your business.
Raw materials are essential to every manufacturing process – and with today’s complex supply chains, most of us don’t even know all of the materials we depend on!
Gary didn’t think about raw materials shortages at first…
If you’re a regular here at Zattatat, you know that Gary is an accountant in his 40s who runs a side business as a baker.
And luckily, at his regular meetup with his friends…
…Gary had learned that raw materials shortages were something he as a small manufacturer should be aware of.
So Gary had created a news alert for himself for the key ingredients of his cookies – chocolate, flour, eggs, and so on. And there had been no major news on the commodities markets for any of these items. So imagine Gary’s surprise when he realized that his business was going to be impacted by a gloabal shortage of…
See, Gary uses baking sheets to bake his cookies. And his recipes are calibrated for the sheets he normally uses, which are made from aluminum. So when it was time to replace his baking sheets on the usual schedule, Gary was astounded to learn that an aluminum shortage had caused a HUGE increase in the price of his pans!
He bought some cheaper pans…
So Gary asked his friend Process Cat about Raw Materials Shortages.
Process Cat explained that, since the baking sheets are a relatively minor part of the total cost of Gary’s cookies, he was probably better off just paying the premium and having the right baking sheets in this particular situation.
And, since Gary’s cookies are a medium-to-high-end product (as compared to, for example, packaged grocery store cookies), it should feasible for him to pass on the added cost to his customers if necessary.
Luckily, Gary found that…
Weekly Challenge:
Are you sufficiently paranoid about all of the raw materials that your manufacturing process depends on? If not, you should start panicking now!
Totally kidding. In reality, just take a moment to reflect on how complex and interconnected our global supply chains are. And come back next time for a discussion about the causes of raw materials shortages!
