If you run a business or the procurement department of your organisation, the consistent increase in the cost of raw materials is one of the most evident trends that you'll have noticed. For example, thermoplastics are up 70% in a year, with timber and steel following the same trajectory. This means that day-to-day operations cost more, and your company could be struggling as a result. Learn more about what's behind the raw material cost increases and some strategies for coping with prices in the future.
Fuel Price Increases
One of the main causes of the increase in raw material prices is the rise in fuel costs. Geopolitical events mean that countries importing energy and fuel from their standard partners struggle to do so as they run the risk of sanctions. The existing supply becomes more and more scarce as time goes on, and fuel suppliers have the opportunity to increase their prices.
These price increases continue down the chain, with the end consumer taking the final brunt of the price increase. Both the price of energy for production and the price of fuel for transporting goods are increasing, so buyers are met with two significant factors combining to drive prices ever higher as time goes by.
Logistical Cost Changes
The cost of logistics has also increased. One of the major causes of logistical issues for automotive material suppliers is Brexit. The increase in the amount of paperwork for every single shipment means that companies spend more money on wages, increasing the price of their raw materials to make up for any losses that new layers of bureaucracy cause.
This also means that there is less supply in the market. With less supply and buyers still needing to access their goods, companies start to outbid one another to get their hands on products. Prices start spiralling out of control, and some of the smaller companies in the market may not even get any raw materials as the cost of procurement exceeds their budgets.
Try A Reliable Supplier
If you're wondering how to reduce raw material costs, a reliable supplier is an ideal way forward for you. Finding a local and reliable supplier means that you communicate in the same language with no time zones affecting your conversations. The most reliable suppliers also deal with paperwork in a more efficient way, getting products through customs as quickly and easily as possible and limiting your costs. When part of the cost-push is a supply issue, seeking out a better supplier is a necessity.
Contact the experts at BTL today to find out more.