Raw material scarcity and its impact on business

On the one hand, demand for raw materials continues to grow unabated: global population growth, the rapid rise of the middle class and the continuous emergence of new technologies and applications place ever greater demand on natural resources. On the other hand, the supply of a wide range of natural resources such as crops, marine life and minerals, as well as their derivatives, face increasing constraints: factors such as climate change, water scarcity, political instability and resource nationalism further constrain supply of stocks already facing depletion.

The growing, long term imbalance of supply and demand threatens business performance across the board. Firms unable to insulate themselves against the threat of scarcity will face significant challenges with their financial performance, growth and long term competitive advantage. Securing long term supply cost efficiently and sustainably is becoming a business-wide imperative.

KPMG research reveals that firms across a wide range of industries have typically been slow to develop long term strategies and responses, thereby missing on opportunities to make early moves and position themselves competitively. Key findings indicate:

I. Firms expect raw material scarcity to have significant impact on business performance

II. Despite this, businesses have been slow to develop responses and typically relied on traditional procurement levers

III. To develop comprehensive, innovative responses with long-term sustained impact, firms must:

1. Elevate the topic to the top of the management agenda

2. Inject strategic capabilities in relevant functions typically viewed as operational

3. Foster strategic, cross-functional collaboration and problem solving across relevant functions

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