BrazilRaw material prices and supply shortages skyrocket (in 7 charts)
European consultancy Inverto (a subsidiary of BCG) has conducted an in-depth study into the raw material landscape and how procurement and supply chain leaders aim to navigate the mounting price and supply shortage challenges. A round-up of the report’s key findings in seven charts.
More than 90% of study participants – board members and leaders in the supply chain and procurement departments – report that raw material prices have risen noticeably since the outbreak of the pandemic. Meanwhile, 45% of companies are strongly affected by changed or lower supply of raw materials.
Extended delivery times and lower raw material availability are the biggest challenges for the supply chain.
Commenting on the supply chain impacts, Thibault Lecat, a Managing Director at Inverto, said: “In the short term, companies cannot escape rising prices, you can't beat the world market, and this crisis affects everyone – both internationally and the direct competitors. The most important thing businesses can do right now is to secure supplies in order to maintain delivery capacity.”
Going forward, 76% of all respondents – expect a strong or moderate cost increase in raw material prices within the next 18 months.
Zooming in on different types of raw materials, fears of price increases have increased for (almost) all raw material groups compared to the year previous. The surge in prices are most acute for: aluminium (48 percent), plastics (48 percent), ferrous metals and steel (48 percent) and wood, paper and cellulose (40 percent).
So what do companies expect to do to mitigate the increasing raw material prices? Passing on increased costs is deemed the most appropriate measure, along with a number of initiatives that can improve future performance.
What measures are companies taking to mitigate the raw material pressures? Price negotiations, index-based pricing and building alternative suppliers are among the most common measures.
Going into 2022, a large proportion of respondents expect supply chain risk management to be a permanent change brought about by the pandemic, followed by fewer just-in-time deliveries.
The study by Inverto was conducted among around 100 leaders, procurement and supply chain managers form across Europe, with the majority of respondents active in the manufacturing industry.
