The months of materials shortages during the pandemic have turned into years. There have been multiple factors that contributed to this, including the conflict in Ukraine, and manufacturers and consumers are feeling the effects of raw materials shortages. Rising demand for products is putting an incredible strain on businesses and causing severe supply chains challenges for many industries, but particularly in the manufacturing industry. Without the necessary raw materials, many products simply can’t be produced in the volumes required to meet consumer demand.
A key part of the problem is shipping limitations, with a shortage of containers and long delays at ports. The shortages of certain raw materials are now becoming critical for many industries.
What raw materials are expected to cause supply chain problems in 2023?
Certain resources are becoming more difficult to come by in 2023. These are the hard assets required to produce heavy equipment, tools and even vehicles as well as many other products. We are all being impacted by issues with raw materials for energy production and certain agricultural resources are causing issues as well.
One of the biggest concerns for 2023 is copper, as it’s used for wiring in many complex electronic devices as well as piping in construction. Copper inventories are hitting record lows at the moment and the same trend is happening with nickel, which is a key component of lithium-ion batteries.
Adhesives are also a problem as there is a lot of demand for them but problems with supplies are creeping into supply chains.
The best way to address the materials shortage problem is to make them less likely to happen.
What are the leading causes of supply chain material shortages?
There are many things that can cause these shortages, such as internal issues, external issues or problems with the general supply chain. Here are some examples:
- Inaccurate lead times from buyers.
- Inspection identifies quality issues.
- Complex production processes resulting in variable yields.
- Poor planning from the buyer.
- Quality defects identified after production.
- Supplier shortages of components/ingredients/raw materials.
- Problems with supplier capacity.
- Commodity scarcity.
- Sudden increases in demand.
- Instability relating to geopolitical/environmental concerns.
- Longer supplier lead times than expected.
- Poor planning from the supplier.
General Supply Chain Issues
- Inaccuracies in inventory counts.
- Short deliveries.
- Damage to goods that occurs in transit.
- Loss of shipments.
- Issues with transportation capacity.
- Delays in shipping/transit.
There are a lot of potential problems that can lead to shortages, but some can be prevented with good planning while others are impossible to predict. It is important to act on the things that can be prevented to avoid unnecessary disruption in an already-challenging ecosystem.
How can the risk of materials shortages be decreased?
There are various measures that can be taken to navigate the shortages of the raw material:
Anticipate Supply and Demand and Foster Good Relationships With Suppliers
As it stands, suppliers are having to prioritise when it comes to the orders they are shipping and you’ll naturally want your business to be high on their priorities list. For resources that you are likely to need a lot of, you should try to develop a strong relationship with suppliers. There are many benefits to doing this, and it doesn’t take a lot to build stronger relationships:
- Communicate actions, defects and other relevant information with suppliers.
- Give suppliers access to current inventory levels and performance metrics.
- Monitor and control early deliveries that play a role in excess/obsolete inventory.
Don’t Focus Too Much on Cost Downing
Manufacturers often accept longer lead times in order to lower short-term costs but an over-emphasis on cost can cause longer lead times, loss in product quality, weakened relationships with suppliers and more problems.
The benefits of not focusing too much on lowering costs include lead times, supplier flexibility and risk management.
Look Into the Market’s Hidden Excess Capacities
There may be space to investigate opportunities with global suppliers with free capacities and you might even find alternative raw materials that you could use. A broad approach to investigating global suppliers with free capacities has a greater chance of success.
Look beyond the obvious and investigate new potential suppliers in other regions. Industries sometimes develop in different ways across different markets and the market is globalising.
Get a Second Supplying Source
This is one of the most powerful ways to reduce the impact of this shortage crisis and you need to maintain good relationships with existing suppliers. But, simultaneously, you should start exploring options for secondary suppliers as part of your cost and risk management strategy.
This approach makes you less reliant on specific suppliers and you get a safety net for when your main supplier has difficulties. You also gain additional flexibility to handle unexpected events that might threaten capacity.
How can ERP can help navigate the raw materials shortage?
Supply chain disruptions have consequences, and it is not always in your power to fix the problems but some can be alleviated with the right ERP solution.
Enterprise Resource Planning (ERP) software brings disparate applications together under a single umbrella. Data from every department is fed into the central database, synchronising all that data for employees and this enables individuals and teams to view mission-critical data in real-time. A cloud-based ERP solution enables access to this real-time data anytime and anywhere, so there is a comprehensive view of operations.
This kind of 360-degree view enables businesses to scrutinise all operations, including supply chains. Instead of reacting to pain points when they arise, like missed shipments or order backlogs, you can identify disruptions before they occur. This allows time to mitigate them by monitoring KPIs within the ERP system.
ERP solutions also bring about efficiency improvement. Where possible, manufacturers can find opportunities to reduce the quantity of materials used per product, for example, this decreases the demand for supplies, relieving the impact of shortages when they occur.
Most ERP systems feature supply and demand planning, whereby purchase orders are automatically raised or cancelled based on current sales demand. This kind of forecasting and automation is extremely helpful in times of uncertainty.
When we are experiencing global issues like raw materials shortages, everyone affected should make it a priority to address the problem where possible. This article suggests some measures you can take to address or mitigate problems. Explore what you can do and take action where possible. It may take some work to do these things, but the benefits will be worth it in the long run.
Why choose Eventura as your ERP implementation partner?
Eventura has been providing robust business solutions to countless organisations for over two decades. We are ERP experts and can identify all of your business needs, and deliver a comprehensive ERP solution that works for you.
As Sage 200 Partners and NetSuite Solution Providers, we can help you identify which solution will fit your business needs the best. Our expert team of business analysts, developers, consultants, technicians and support staff can guide you through your entire project, from initial scoping through to implementation and on-going support.
We’re also managed IT service providers meaning we can help you identify your entire IT infrastructure requirements from day one. If you would like to speak to one of our ERP experts to discuss your options or request a free demo, you can request a free call back here.