How Raw Material Costs Impact Global Supply Chains

Within the aircraft industry, many operations heavily depend on a variety of raw materials for producing the various structures, assemblies, and systems that make modern flight and design possible. The price of raw materials has the most impact on industries that require more specialized components, where avionics, lightweight sin pieces, or even keypad units can be expensive as a result of necessitating rare materials that are not always readily available or cheap. The cost and availability of raw materials have also shown profound effects on global supply chains in recent years in the wake of the COVID-19 pandemic and following disruptions. In this blog, we will discuss raw material costs in more detail, covering how they impact global supply chains for aviation operations and beyond.

Understanding the Role of Raw Materials in Global Supply Chains

While some parts can take advantage of recycled or repurposed materials, factory-new items and initial productions are typically made from materials that are extracted from natural environments and processed for use. Raw materials for such purposes come in a variety of forms, including metals, plastic, chemicals, and organic products. The pricing of these materials is generally affected by a range of factors, including the origin location, cost of processing, availability, and more.

Beyond such basic factors, geopolitical tensions, changing trade policies, natural disasters, and changing market demand cycles all have a further impact on pricing volatility across the globe. As supply chains continue to face disruptions, manufacturers are currently being faced with rising costs for raw materials, which is impacting price and availability of various parts.

Global Supply Chain Challenges Stemming from Raw Material Cost Fluctuations

• Cost Concerns: Budgeting and financial forecasting is often negatively impacted as a result of unstable raw material pricing, where organizations desire more flexible pricing models to protect themselves from price instability.
• Lower Stock: The recent rise in raw material prices has caused various suppliers to shift their business focus toward bigger customers while reducing overall production, which has resulted in shortages for a number of products and systems.
• Stock Issues: The management of inventory in the face of raw material price increases requires companies to decide between carrying more stock to protect against fluctuations or maintaining minimal inventory to decrease storage costs.
• End-Item Price Rise: Increasing raw materials costs will subsequently cause a rise in the price of an end product, potentially affecting demand. Higher product costs may decrease market demand substantially, especially within price-sensitive sectors.

Strategies to Mitigate the Impact of Raw Material Costs

• Businesses that manufacture multiple part types and systems together may be able to contract pricing volatility by purchasing everything at once.
• Taking advantage of extended supplier agreements provides businesses with more stable costs and dependable acquisition methods for materials.
• Businesses should expand their supplier base while selecting supply locations from different regions to avoid being restricted by a single source. This also neutralizes the potential of political and natural disruption risks.

Where Can You Purchase High-Quality Materials for Operations?

When you are searching for various materials or part types like controllers, motors, and relay sockets, look to Electromechanical Distribution as your sourcing solution with our selection of 2 billion+ items. Take the time to explore our curated website selection, where everything featured is ready for purchase today with competitive pricing and rapid lead times. Once you find an item of interest, simply fill out a Request for Quote (RFQ) online. Upon our review, one of our friendly sales experts will connect with you within 15 minutes or less to provide a customized solution. If you are interested in a direct quote, please get in touch by emailing us at sales@electromechanicaldistribution.com or calling us at +1 (714)-705-4780.