Anticipate and prepare for potential disruptions in raw materials.
06/02/2023
Reading time: 3 min
Raw material disruptions present a risk that can severely disrupt and impact the production of manufacturers. These disruptions can have many causes, including global crises such as the Covid-19 pandemic or the war in Ukraine. Indeed, these crises have resulted in longer delivery times for many raw materials, increased prices and freight costs, and a strong demand faced with low available capacities in the market.
These disruptions can be disastrous for processors as supply tensions may lead to cancellations of deliveries from suppliers, causing significant delays or even order cancellations from manufacturers. The production of certain ranges may also be temporarily suspended or even permanently halted if the company can no longer keep up.
It is therefore important to take measures to prevent and anticipate these disruptions.
How can we best prevent and anticipate raw material shortages?
Some crises and certain factors are not predictable, or can be predicted only shortly before they occur. However, there are several solutions to anticipate and deal with raw material shortages at production sites.
Assessment of Present Risks
To anticipate raw material shortages, business leaders or supply chain and purchasing directors must assess the present risks on their supply chain and develop an action plan to mitigate or counter the effects of such an event. They can also work on long-term sourcing strategies.
Monitoring
Companies can also monitor raw material price trends and supply tensions to better foresee and manage risks. It is important to monitor market trends daily and ensure that stocks are sufficient to meet demand.
They can also adopt solutions like Oplit that automate stock and raw material level monitoring, and alert them when these levels reach a critical threshold established by them.
Designing a “Crisis Team”
One of the best ways to prepare for raw material shortages in the production chain is to form a team of leaders from sales, purchasing, production, logistics, and finance sectors to prioritize, rehearse, and harmonize operations in order to be ready on the day the crisis occurs to continue operations or restart them once the crisis is over.
Indeed, designing and rehearsing several critical scenarios will allow companies to respond quickly in case of problems, thus avoiding tensions within teams. This can also help develop teamwork and cooperation.
Negotiation and Price Revision Clause
In purchasing, it is important to implement negotiation strategies to obtain competitive prices and discounts to replenish stocks at lower costs.
Reviewing quotes and integrating a price revision clause to adapt to fluctuations in raw material prices may also be considered.
Alternative Suppliers
One of the main solutions to address raw material shortages, which is highly recommended, is to diversify sourcing. This may include exploring new suppliers as locally as possible, using alternative raw materials, promoting the circular economy, and recycling materials discarded as waste to slow down the draw on resources as well as establishing long-term contracts with reliable suppliers.
Optimal Selection of Production Orders
Finally, the optimal selection of production orders to launch on the production line is also a prerequisite to anticipate or react to these shortages.
The optimal selection of production orders can be carried out using specialized solutions, such as Oplit for example, which take into account production constraints and objectives and provide optimal solutions for the scheduling of production orders.
To conclude
By analyzing these different avenues, companies can take measures to reduce the risks associated with supply disruptions and ensure a stable and reliable supply. It is certain that when such crises, like that of Covid-19, occur, their magnitude is such that it is difficult to be fully prepared for them. However, it is this type of crisis that allows us to study the worst case scenarios, find alternatives, and best prepare our teams.
