SAFEGUARDING RAW MATERIALS FOR THE LONG-TERM

By: Evan Lucyk

The issue of sourcing has always been one that ebbs and flows in levels of anxiety. What is available—and where—and how many other people are also competing for materials is constantly in a state of flux. Normally, we take this all in stride and plan accordingly, so we’re not scrambling for products to keep production going.

However, when the COVID-19 pandemic took the world by surprise last year, we (along with everyone else across the globe) were faced with a whole new level of sourcing stress. Panic buying set its sights on everything from toilet paper to sanitary wipes, bleach, and beyond. As for the mining world, we felt (and still feel) the pinch most painfully in sourcing raw materials.

SOURCING CHALLENGES FOR RAW MATERIALS

One of the prime factors we constantly face in sourcing raw materials is the ebb and flow of costs and lead times. This is nothing new, yet it has proven far more challenging throughout the pandemic, with prices having increased on many things.

For instance, at Bit Service, we have been having a difficult time sometimes getting even the most mundane steel shipments or any number of other items that typically would have been the normal course of business. The things that would come at the expected arrival date and time take far longer. We’re seeing deliveries that would have only taken a single month in the past now suggesting that we won’t see the products we’ve ordered for 12 to 14 months (and that’s if they are available at all).

The afore-mentioned hoarding of toilet paper comes to mind, as the equivalent in our industry seems to be a trend to companies stockpiling precious materials because they are nervous and want to avoid even the possibility of putting their production or their customers at risk by running out. As a result, we’re seeing companies stockpiling full year(s) worth of stock on hand to make sure that they have something for when the need arises.

SEEKING SOLUTIONS

As we saw with the pandemic, after reaching a fever pitch in the early days, panic buying of toilet paper and other goods has simmered down by now. We believe that the manufacturing and mining industries will also see this, where the supply and demand—and related costs—will all align once more. It’s likely going to end up being self-correcting in the long run, given the intense inventory costs that many companies incur to maintain years’ worth of inventory on raw materials they normally would have had only a few weeks. The financial health of the company will be put at risk if they don’t correct that in some way.

It can be difficult as some of the suppliers of raw materials are limited at this current capacity. They’re also hesitant to significantly increase capacity to meet the demand, given that as soon as this current customer demand is satisfied, it’s expected that it’ll start to go back to normal. Currently, suppliers are thinking of what would happen if supply was low. Most of these original manufacturers are looking to pick at their current production capacity and give very long deliveries to hope that they can extend this good period as long as they can.

While we hang in there together and focus on what we can control and how to manage this shift into a new normal in the mining industry wisely, Bit Service is here and ready to help you take the necessary steps to get you where you want to be on your journey. Contact us today, and let’s discover how we can help you.