Raw Material

Posted in Operations and Supply Chain Terms, Total Reads: 263

Definition: Raw Material

Raw material is defined as the crudest form of product possible. It is essentially the unprocessed product. It is the chief constituent of the primary product that is processed or manufactured.


Industrial needs

Raw material is bottleneck assets as the production of other materials depends directly on their availability. Commonly used raw materials in industry are crude oil; used in various industries like pharmaceuticals, chemical and plastic, lumber; used in wood and furniture etc.

In industrial parlance, they are often called commodities. That makes them eligible for trading across various Commodity Exchanges round the world.



There are mainly 4 factors of production. Raw material falls in the category along with labor and capital. This crucial element makes raw materials an indispensible commodity for a manufacturing enterprise and a country.

If a country has succinct raw materials, it need not import raw materials. Thus, it can improve its current account deficit. Abundance of raw materials is directly linked with the prosperity of a region.


Raw material are also an important part of a firm’s inventory management. Raw materials are component parts of the stock of inventories carried by a manufacturing firm at a given time. Every organization has inventories of some type and the economics and techniques of inventory management are critical for efficient operation, profitability and survival; especially in a highly competitive environment.



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