The Importance of Raw Material Monitoring in Supply Chain Management

No matter the industry or sector a business works in, the vast majority of businesses with a supply chain have to rely on the procurement, transit, storage, and usage of raw materials in their production lines. With that considered, effective raw material management is vital for the success of the modern supply chain.

However, due to the potential differences in availability, quality, and demand for certain raw materials, this is often a highly complex aspect of supply chain management. Especially considering that the demand for raw materials has increased between 2010-2022, this is an even more pressing issue today than it was a decade ago.

Source: Consumption of raw materials in the EU from 2010 to 2022, by type.

Businesses that want to establish a streamlined and resilient supply chain must first ensure that they are able to effectively monitor raw materials. With full visibility into raw material management, organisations can reduce risks while maintaining a high final product quality. 

Understanding Raw Material Monitoring

Raw material monitoring is the process of tracking the sourcing, transit, and storage of the raw materials that a business uses in its production. Raw materials are at the base of all supply chains, providing companies with the foundational blocks they need to create products for distribution.

There are several key components that are involved in raw material monitoring:

• Sourcing: identifying reliable and ethical sources and suppliers that are able to offer a long-term, low-risk partnership.

• Quality control: Monitoring raw material standards to ensure high-quality products.

• Inventory management: Tracking stock levels, monitoring turnover rates, and predicting future demand.

Beyond just identifying raw materials and their place within a supply chain, a business needs to develop a more comprehensive overview of their levels and fluctuations across the entire supply chain.

To obtain this insight into raw material monitoring, many businesses turn to cutting-edge tools and systems. For example, the rise of artificial intelligence and machine learning has provided greater precision when it comes to predictive analytics for demand forecasting. Equally, these technologies offer a comprehensive level of risk assessment modelling, allowing businesses to better understand how raw material supply could be impacted by social, political, economic, or unforeseen factors.

Another useful technology that allows businesses to understand raw material monitoring to a greater extent is the widespread proliferation of IoT devices. IoT sensors and monitoring technology can provide a real-time stream of updates about the condition and location of raw materials. This insight helps businesses establish a high degree of visibility into raw material monitoring across their entire supply chain.

Finally, the rise of blockchain technologies, especially in the form of creating an immutable digital ledger, has helped to increase transparency in raw material trading. Businesses can improve traceability by using the blockchain, removing the risk of raw material substitution and the loss of shipments.

Benefits of Raw Material Monitoring

Raw material monitoring is fundamental for success in any supply chain. Without a constant influx of materials, businesses are unable to create the products that then flow through every other stage of their supply chain. A shortage of raw materials or a delay in their shipment can create upstream issues for every single part of the supply chain.

With that in mind, there are numerous benefits to raw material monitoring:

• Improved quality control: By closely monitoring the quality of raw materials as they enter your supply chain, a business can guarantee that the products they use will always be high-quality. The input raw materials have a direct impact on the output of products, making monitoring of raw materials a phenomenal way of maintaining a consistently high-quality final product.

• Enhanced forecasting and planning: While many supply chains are aware that a disruption in raw material delivery can upset all other stages, they fail to look the other way. Demand for a final product can significantly impact the need for raw materials. By using accurate data and AI technology, businesses can predict future demand needs, minimising the risk of stockout and overstock situations across the supply chain.

• Cost efficiency: Improving raw material monitoring practices will help to reduce waste, as your business will have better inventory management. With this level of visibility comes optimised storage, a reduction in unnecessary expenses, and the ability to precisely plan for stock fluctuations.

• Risk management: Enhanced raw material monitoring also leads to better risk management. As raw material input is such an essential part of the supply chain, monitoring their sources with risk management tools helps to identify risks ahead of time. This approach will help to reduce the likelihood of supply chain disruptions, decrease supply cost volatility, and streamline any compliance issues that a business may face. 

Raw material monitoring, especially when done effectively with modern technological solutions, is a fundamental part of creating a stable and successful supply chain. Especially with changing compliance obligations, like the launch of the EU Deforestation Regulation, businesses that monitor the movement of raw materials are in the best position possible when it comes to compliance.

Impact on Supply Chain Efficiency

Effective raw material monitoring has a direct impact on overall supply chain efficiency. With a consistent and high-quality stream of raw materials, a business is able to sustain production across the entire supply chain. Everything from inventory management to quality control measures feeds into raw material monitoring.

By building up resilience, working with low-risk suppliers, and achieving full visibility into an organisation’s raw materials, they can improve the efficiency of their supply chain in several ways:

• Reduction in lead times: Raw material management allows businesses to streamline the procurement process and reduce delays in material collection. Vigilance at the source of a supply chain will translate to efficiency at all levels.

• Increased transparency: Raw materials and their quality are vital for the success of a supply chain as a whole. With that in mind, improving raw material management translates to higher levels of transparency in the supply chain, as businesses can forge better relationships with their suppliers and create collaborative relationships. Businesses can count on their suppliers to provide high-quality materials for their production lines.

• Sustainability: Wherever possible, businesses should strive to increase visibility in their supply chain, as it allows them to reduce their environmental impact. Closely watching over raw material sourcing can help businesses guarantee that suppliers are following the best ethical and environmental practices in their organisations.

• Scalability: Effective raw material management helps businesses rapidly adapt to any changes in market demand. Full control over procurement and visibility into these processes helps to ensure that business operations remain scalable and flexible, ensuring business continuity.

When businesses monitor raw materials, they’re able to achieve a sustainable and streamlined supply chain. While visibility across all supply chain links is important, there is something to be said about the integral nature of raw materials and their impact on all other areas of the supply chain.

Challenges and Solutions in Raw Material Monitoring

While raw material monitoring is a vital pursuit, that doesn’t mean it’s easy to achieve high levels of visibility. When businesses set out to establish a comprehensive level of raw material monitoring, there are a number of challenges that they are likely to encounter.

Here are some of the leading challenges in raw material monitoring and solutions to remedy them in your organisation.

Data Integration

When managing the procurement of raw materials from multiple sources, businesses must be conscious of the need to collate data into one location and achieve a cohesive system. When data sources fragment into several data warehouses or storage systems, a business’s ability to achieve visibility into its raw material procurement is reduced.

Especially as businesses scale, issues with integration become more frequent. If a company suddenly experiences a surge in demand that requires more sources of material procurement, it may fail to have the data infrastructure available to support its rapid expansion.

To solve this problem, businesses must first aim to reduce data silos in their organisation. Especially when dealing with complex supply chains, creating cohesive and centralised data storage systems will streamline the collection and usage of data. When data sources are all in one place, a business is better equipped to use analytics, leverage AI tools, and implement data-first strategies.

Technology Adaptation

In our digital age, it seems like new technologies spring up every few minutes. While it may seem like an enormous change to adopt a new technology and integrate it into your existing supply chain systems, the benefits far outweigh the costs of implementation.

A great example of this is the general resistance to blockchain technologies. Business leaders that don’t understand blockchain technology often assume that it is one and the same as cryptocurrency. While cryptocurrency relies on blockchain systems, they are only a product of blockchain rather than the same thing. However, the negative connotations of cryptocurrency make leaders less likely to employ this technology.

Especially considering that even within crypto investors, 60% of people don’t know what blockchain is, it’s safe to say that in a wider audience, very few people understand blockchain. 

Instead of worrying about new technologies and ignoring them, businesses can strengthen their supply chain by leveraging these new technologies. In the case of blockchain, it can provide enhanced transparency into a supply chain and streamline the process of raw material management.

Regulatory Compliance

Raw material management is a core aspect in many compliance initiatives, with businesses having to keep up with new regulations and where they fall on the spectrum of compliance at all times.

Compliance obligations are a part of raw material management that simply cannot be overlooked. Where possible, we suggest that you seek out advice or guidance that will help clarify what regulations you should be following. Doing this as early as possible will allow you to make intelligent decisions about the suppliers you work with and the raw materials you procure.

How Prewave Can Help

Prewave is a leading expert in real-time risk management superintelligence, with our AI-driven solutions providing support for supply chain management and raw material monitoring. Our systems allow supply chain businesses to defeat data silos, enhance transparency and visibility in the supply chain, and build a more resilient supply chain.

Prewave offers the following solutions to help you achieve resilience and visibility in your supply chain:

• Real-time monitoring: Leverage advanced AI systems to monitor raw materials in real-time, providing a constant stream of insights and alerts to your business.

• Risk assessment: Conduct comprehensive risk assessments with our suite of tools, helping you to identify high-risk suppliers and potential disruptions before they become a problem for your business. Take action and use our suggested proactive measures to reduce delays across your supply chain.

• Predictive analytics: Leverage machine learning to forecast demand and optimise inventory management. Never overstock or sell out before due to poor planning and future strategy building.

• Sustainability and compliance: Ensure ethical sourcing and compliance with modern regulations through Prewave’s advanced tracking and reporting systems.

Leveraging Prewave allows your business to achieve a comprehensive overview of raw material management and every other part of your supply chain.

Conclusion

Raw material monitoring is vital for businesses that are looking to achieve a high-quality, sustainable, and resilient supply chain. Beyond just risk management, raw material monitoring includes everything from supplier relationship building to inventory management and even compliance planning. 

Yet, considering the significant benefits to a supply chain with a high degree of visibility into raw material monitoring, this is one of the most fundamental objectives a business should have. Where possible, organisations should seek to leverage advanced technologies to streamline raw material management.

Investing in a world-class solution like Prewave allows businesses to stay competitive and sustainable while achieving a comprehensive level of visibility, transparency, and risk management in their supply chain. Reach out to the team or book a demo today to find out more.