How Manufacturing Sector Can Leverage AI To Cut Down Raw Material Cost
Manufacturing is one of the activities that accelerated the development of civilization. From manufacturing early wheel to now manufacturing self-driving cars, it is evident that development and growth of the humanity has been heavily dependent on manufacturing. Throughout the history of such a crucial activity we see the importance of raw materials for the manufacturing. Would the artistic crockeries of ancient Rome exist if they had no access to abundant water and clay? Would the Germans dare to take on the world if they had no access to the coal from reign? The answer is no, Manufacturing as an activity is defined as “to convert raw materials into desirable final products”.
Manufacturing sector has a bright and highly profitable future. With increasing population, the demand of products people need and want has skyrocketed. But the high cost of raw materials is still the number one concern seeking a solid solution. The sector is so competitive and many manufacturers go bankrupt due to varying raw material cost.
Why are low cost raw materials desirable?
The answer is simple. If the cost of raw materials is low there will be enough room for the manufacturer to price the final product lower than the competitors and still be able to make significant profits, as the golden rule of pricing says “low price is the best marketing strategy”. With rise of emerging technologies like Machine Learning and Artificial Intelligence companies are looking to implement these technologies to solve their raw material problem and arrive at a sustainable and long-term solution. Leading manufacturers in steel, chemical, and other verticals are the early adopters of AI for reducing the cost of raw materials. The high cost of raw materials is not just associated with new players in the industry but established brands are equally reeling under it. The inability to smartly forecast demand for raw materials has forced companies to rethink and reorganize their growth model. Consider the two scenarios below to understand how a AI based solution can help a manufacturer in solving the high cost raw material problem
Scenario One - Lack of Artificial Intelligence
The surge in demand for products is not the same all the time. Now, the raw material demand is estimated to be either unnecessarily more or significantly less than the exact amount. Therefore, production is more than required or not sufficient to cater to the current demand. Apart from this, Every customer comes up with its own quality requirements. Finding an Economical recipe to Manufacture a Product with specific requirements takes at least 15 days.
Hence, the extra time is being taken to deliver the product. The amount of cost and time associated with R&D, Volatility in Raw Material Cost, Storage, and Shipping makes it a big enough cost that cannot be overlooked. Moreover, it ends up compromising the ROI.
If your raw material demand production was incapable to serve the requirement then you lose sales to your competitors and not to mention the bad reputation it will fetch will hamper your brand image
Unfortunately, odds are not favorable for reduced costs in both situations. But AI will take care of it!
Scenario Two - Empower Raw Material Cost Reduction With AI
An AI-based solution is capable of optimizing raw material costs. How does it happen? AI solutions analyze the clients requirement data to compare it with the Knowledge Graph to generate value-driven insights. These insights help in predicting the right amount of raw material required. This way, manufacturers are able to save a significant amount of time and cost.
Raw material cost optimization is one of the many benefits that AI-enabled solutions bring to the table.
AI solutions have been developed and trained in Finding the best raw materials mix. This results in finding out the right mix of raw materials to meet current and upcoming demands while ensuring it doesn’t compromise the operational efficiency and is also the most affordable option.
This proper and AI-driven way of raw material cost optimization will reduce the manufacturing cost by 15%-20%.
If the high cost of raw materials is your top concern? Talk to AI expert
Summing It Up
Artificial intelligence is a revolutionary technology and contains lots of potential for the creation of a sustainable ecosystem for the manufacturing industry and to pace up productivity level. The role of AI in reducing the cost of raw materials helps in ensuring raw material is neither in excess nor in shortage. Therefore, it also results in the emergence of an efficient production process