Raw Material Brokers

Raw materials are the products that manufacturing companies require to make their finished goods. In a car factory, for example, they need the steel to make auto components. In a large bakery facility, they would need flour and sugar to bake their breads and cakes. These ingredients or products, that begin the process of making a finished product, are the raw materials. And unlike small enterprises who source the materials from wholesale distributors, large manufacturers buy on the open market. As a result, the global inventory levels, and the price points are constantly in flux. And, this makes for a very difficult job for the CFO or Inventory Manager of a company. Typically, what they will do is work with a raw materials broker, in an attempt to obtain the best possible price, as well as just-in-time inventory.

Sourcing raw materials can be tedious and time consuming. Also, when one supply is exhausted, or the location from where the supply came has suffered some sort of disaster, then manufacturers are left scrambling to meet their orders, and satisfy demand for their finished goods. Raw material brokers often step in to find alternate sources of the important core material. Another reason manufacturing firms contact brokers is to benefit from the combined purchasing and shipping. While the companies are already buying in significant volume to warrant better pricing, it is sometimes better to work with a broker so that shipments can arrive on time. If the broker knows that a boat is leaving with another firm's supply of raw materials, then it might be possible to piggy-back orders. This is more efficient and often cheaper for both companies.

In terms of suppliers, the people who process or harvest the raw materials, they may decide to work with a broker when there is a glut on the market. Surplus inventory is a problem, especially when storage costs are so high, and in the case of edible materials, spoilage is expensive. Raw material brokers can assist in getting that inventory sold. Depending on the type of brokerage, and the financial resources available to them, the brokers may even purchase the goods themselves, eliminating the problem for the supplier. Also, there may be several middlemen between the supplier and the manufacturer. The brokers become the go-between, tightening the circle, so that there is less work for both the suppliers and the manufacturers.

Furthermore, raw material brokers might deal in futures and options trading, too. In these situations, it may not even be the manufacturers that are looking to buy products. In fact, everyday people trade in futures and options, which are side deals that affect the way the market moves. Generally speaking, the brokers monitor and analyze what is happening in the market place. Rumors, natural disasters, changes in laws, military coups, and other events that impact the production and distribution of raw materials are all brokers' concerns. Brokers must be savvy enough to recognize opportunities, and must keep their clients informed about world news, and fluctuations in the market.

What is most interesting about the functions of raw material brokers is that not all clients take possession of their inventories. People who trade on speculation, for example, are engaged in contracts, but there is no intent to hold the inventory. Large manufacturers, on the other hand, who need the raw materials, purchase through brokers for the express purpose of using the goods.