Best practices
How to best prevent and anticipate raw material shortages?
In conclusion
Raw material shortages present a risk that can severely disrupt and impact manufacturers' production. These shortages can have many causes, such as global crises like that of Covid-19 or the war in Ukraine.
Raw material shortages present a risk that can severely disrupt and impact manufacturers' production. These shortages can have many causes, such as global crises like that of Covid-19 or the war in Ukraine. Indeed, these crises had the effect of causing the lengthening of the delivery times of many raw materials, the rise in their price and in freight, and a strong demand confronted with low capacities available on the market.
These shortages can be disastrous for processors because the tensions on supplies can cause the cancellation of deliveries by suppliers, leading to significant delays or even order cancellations on the manufacturers' side. The production of certain routings can also be temporarily suspended or even permanently stopped if the company no longer finds it worthwhile.
It is therefore important to take measures to prevent and anticipate these shortages.
Some crises and some factors are not foreseeable, or foreseeable only a short time before they occur. There are, however, several solutions to anticipate and cope with raw material shortages at production sites.
Examining present risks
To anticipate raw material shortages, business leaders or supply chain and purchasing directors must carry out an examination of the risks present in 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 supply strategies.
Monitoring
Companies can also monitor trends in raw material prices and supply tensions to better forecast and manage risks. It is important to monitor market trends daily and to ensure that stocks are sufficient to meet demand.
They can also, in parallel, adopt solutions like Oplit that automate the monitoring of stocks and raw material levels, and that alert them when these reach a critical threshold established by you.
Designing a "Crisis Team"
One of the best ways to prepare for raw material shortages on the production chain is to put together a team of leaders from the sales, purchasing, production, logistics, and finance departments in order to prioritize, rehearse, and harmonize operations so as to be ready on the day the crisis occurs in order to continue the activities or to restart them once the crisis is over.
Indeed, designing and rehearsing several critical scenarios will allow companies to turn around quickly in case of a problem, and this will avoid tensions within the teams. This can also help develop team spirit and cooperation.
Negotiation and price-revision clause
On the purchasing side, it is important to put in place negotiation strategies to obtain competitive prices and discounts in order to be able to renew stocks at a lower cost.
Reviewing quotes and integrating a price-revision clause in order to adapt to changes in raw material prices can also be considered.
Alternative suppliers
One of the main solutions to cope with raw material shortages, and one that is strongly recommended, is to diversify supply sources. This can include exploring new suppliers that are as local as possible, using alternative raw materials, favoring the circular economy and recycling materials discarded as waste in order to slow the drain on resources, as well as setting up long-term contracts with reliable suppliers.
The optimal selection of work orders
Finally, the optimal selection of the work orders to launch on the production chain is also a prerequisite for anticipating or reacting to these shortages.
The optimal selection of work orders can be carried out using specialized solutions, such as Oplit for example, that take into account production constraints and objectives and that provide optimal solutions for scheduling work orders.
By analyzing these different avenues, companies can take measures to reduce the risks linked to raw material shortages and ensure a stable and reliable supply. It is certain that when such crises, like that of Covid-19, occur, their scale is such that it is difficult to be totally prepared for them. However, it is this type of crisis that makes it possible to study the worst case scenarios, to find alternatives, and to best prepare your teams.
