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.