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NAME: Definition & important points for buyers
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Critical materials brought to the point:
Critical materials are raw materials or components that are essential for production and at the same time have a high supply risk, whether due to limited availability, geopolitical factors or market concentration. Their systematic identification and management is of strategic importance for procurement in order to ensure security of supply and competitiveness.
Example: An electronics manufacturer identifies rare earths as a critical material, as 85% of global production comes from a single region, and subsequently develops a dual-sourcing strategy with a 6-month stockpile and the qualification of recycling suppliers as an alternative source of supply.
Contents
Introduction to purchasing controlling: Critical materials
What are critical materials?
Critical materials are raw materials, components or products whose availability is of crucial importance to a company or industry and where disruptions in the supply chain can have a significant impact on production and business operations. These materials are often characterized by limited resources, few alternative suppliers or high dependence on certain geographical regions. Identifying such materials is essential in order to recognize risks at an early stage and take strategic measures to secure supply.
Core elements of critical materials
- Rare availability: Materials that are only available in limited quantities or are difficult to mine
- High supplier dependency: limited number of suppliers or monopolies on the market
- Strategic importance: Indispensability for the production of core products or services
- Risky origin: Procurement from politically or economically unstable regions
Significance for purchasing
Control over critical materials plays a central role in procurement management. Buyers must ensure that these materials are always available in order to avoid production downtime and maintain the company's competitiveness. This requires proactive risk management, diversification of the supplier base and close cooperation with strategic partners.
- Security of supply: ensuring a continuous supply of materials despite market uncertainties
- Risk minimization: Identification and reduction of procurement risks through diversification
- Cost control: avoidance of price peaks through long-term contracts and market analyses
- Strategic partnerships: Building relationships with suppliers for better negotiating positions
Strategies for dealing with critical materials
Effective management of critical materials requires strategic risk management and proactive procurement measures. By diversifying suppliers, building up stocks and developing substitute materials, companies can reduce their dependency and increase security of supply.
Case study: Securing the lithium supply in the electrical industry
A battery manufacturer is dependent on lithium as a critical material. Faced with increasing demand and limited suppliers, the company decides on the following strategy:
- Supplier diversification: establishing partnerships with mines in various countries such as Australia and Argentina.
- Warehousing: Creation of safety stocks to cushion short-term bottlenecks.
- Investment in recycling: Development of technologies to recover lithium from used batteries.
- Researching substitute materials: Research into alternative materials such as sodium-ion batteries.
These measures enable the battery manufacturer to safeguard its production, minimize risks and remain competitive on the market.
Evaluation and strategic findings
✓ Critical success factors
→ Risk diversification: systematic distribution of procurement sources across different geographical regions and suppliers
→ Innovation management: Continuous research and development of substitution options for critical materials
→ Strategic partnerships: Building long-term relationships with key suppliers and developing recycling networks
⚠ Central challenges
→ Market volatility: wildly fluctuating prices and availability make long-term planning difficult
→ Geopolitical risks: Dependence on politically unstable regions jeopardizes security of supply
→ Technological barriers: Limited recycling options and complex substitution processes
Future trends and implications:
"The transformation to a sustainable circular economy is becoming a decisive competitive factor."
→ Increased integration of recycling technologies
→ Development of innovative material substitutes
→ Digitalization of supply chains for better transparency
→ Development of regional supply networks
Conclusion on the security of supply of critical materials
Dealing with critical materials requires systematic and forward-looking management. By combining risk diversification, strategic partnerships and innovative technology solutions, companies can strengthen their security of supply in the long term. The development of recycling concepts and alternative materials in particular will become increasingly important in the future. Only those who actively tackle these challenges and invest in future-proof solutions will be able to remain competitive in the long term.
