Manufacturers turn raw materials and natural resources into useful products for a wide range of customers. Manufacturers typically rely on a raw materials supplier to complete this process efficiently. This company collects natural resources or other raw materials and ships them to manufacturers and other businesses. This supplier’s individual activities primarily consist of gathering and disseminating resources to paying customers. This process is an important part of the free market economy and a major component of economists’ invisible hand theory.
In order to collect and distribute raw materials, a raw materials supplier usually needs access to natural resources. A lumber mill, for example, requires trees, which can grow in a variety of locations depending on the type of tree required the supplier. Land purchases or leases from governments or other businesses may be required to gain access to trees. Other natural materials, such as stone, minerals, fish, and livestock, are in the same boat. When compared to competitors, creating exclusive use agreements can help a supplier engage in better business contracts.
Natural resources or other raw materials may require some refinement. If raw materials suppliers are going to sell directly to manufacturers, they must have these refinement capabilities. Alternatively, the materials may be sent to a middleman operation, which refines them and then sells them directly to manufacturers. This process is unlikely to be common because suppliers typically have refinement capabilities to meet the needs of manufacturers. Suppliers may be able to engage in refinement activities at the point of natural resource collection in some cases.
To move their goods from the point of collection or production to end users, all businesses must have sales departments. A supplier of raw materials is no exception. In order to induce or increase sales, this organization frequently employs individuals who handle sales and customer service. The supplier, in most cases, is unconcerned about how many customers it has or who it sells materials to. The more customers who buy the materials, the more money the supplier makes, which allows them to improve the material collection process.
A raw materials supplier’s services and products may need to change over time. Because the free market is rarely stable, constructive capitalism emerges. Raw material suppliers must adjust their offerings to ensure long-term viability. Suppliers can achieve this goal listening to the needs of manufacturers.