Material scarcity from the perspective of manufacturing firms : case studies of platinum and cobalt

Abstract

Many agree that materials availability, especially non-renewable materials, is an issue of global concern. However, the implications and strategy options for manufacturing firms are not obvious. Manufacturers select materials and make decisions by selecting materials with the best set of properties and price that can be used in products to satisfy customers, who mostly do not base their purchases on materials used. There may be additional motivations and directions for action for manufacturers if scarcity is examined from their perspective. A historical case study of the 1970's cobalt crisis was performed. The effects of cobalt scarcity and the responses taken by supply-chain firms downstream to primary producers were examined. In addition, a system dynamics simulation model of the platinum material system was built using historical data specific to the platinum market. The effects of platinum scarcity and the impact of pursuing recycling on manufacturer concerns were examined. It was shown that scarcity affected manufacturers through process disruptions and unexpected increases in expenditures. Recycling, substitution and dematerialization were actions taken or encouraged by firms in the manufacturing industry that reduced the impact of scarcity. These responses take time to implement, are not available to all and lead to permanent market changes. It was recommended that they be considered early and incorporated as strategies for firms facing increased scarcity. Multiple recycling scenarios were simulated. Recycling is a tactic already encouraged by manufacturers because it costs less than primary processing. The analysis, which specifically incorporate ore depletion and other materials availability constraints, demonstrate two added benefits to recycling. Recycling reduces future primary production costs in markets with inelastic demand and low discovery rates. Also, recycling is more responsive to price than primary production and stabilizes price in a market with rapidly growing demand and long delays for primary production expansion. In conclusion, manufacturing firms may not be adequately appreciating the benefits of recycling, dematerialization and materials substitution if they do not consider the effects of increasing scarcity. Moreover, because markets respond slowly to changes, manufacturers who can respond rapidly to increasing scarcity because they have a strategy in place can gain a competitive advantage.