Raw Materials Business

In this series, we will look at the businesses in the various stages of the Supply Value Logistics Chain, instead of looking at specific businesses, we will take an abstract look at the value chain in this link of the supply chain. This can be used as a guideline or framework to choose a business idea.

This is part of a series on How to Start, Run, Grow & Fund a Business in South Africa. These pages has to be read in order:

  1. How to Start, Run, Grow & Fund a Business in South Africa (using what you currently have)
  2. Choosing the right Business Idea for You
  3. Writing the Business Plan
  4. Supply Value Logistics Chain – Research and Understand Your Industry
  5. Raw Materials Business (This page comes here as the first stage of the Supply Value Logistics Chain)
  6. Test if Business Idea is right for you

Today we will look at the supply of raw materials. A simple Supply Value Logistics Chain will look something like this:

This is a B2B (business-to-business) business that supplies Manufacturers. Now if you don’t know what a “raw material” is, it does not have to be raw and does not have to be a material, it is anything that can be used in the manufacturing process. The dictionary says its ” the basic material from which a product is made.”

Remember our value chain looks like this:

We dealing with the second orange block here: Materials. This can be anything. So we not just talking about textile materials here. This is usually the materials part of the value chain. But the raw materials part of the supply chain will also have its own value chain. See examples below.

There are various facets and business models in this part of the supply chain, in this context we are referring to the immediate raw material that is used to manufacture something. Like if you making roof sheets, you are not going to buy iron ore direct from the mine, you are going to buy rolled metal that has been processed. That being said you still need to look at how do you provide value. If we look at the hot chips/slap chips/french fries business, we know its made from potatoes, but some takeaways want to buy the raw chips already peeled and cut. In that context, it is processed (peeled, cut) and sold at a premium because the value that has been added saves the takeaway shop from the laborious task of peeling and cutting the potatoes.

Same things with the timber industry. We know its made from trees. The farmer grows the tree, cuts it and sells it to the timber mill, who in turn processes it and sells it to the furniture and building industry. The timber mill doesn’t know about growing trees (unless he’s vertically integrated), his forte is cutting, how to use the saw. His raw material is trees. The couch maker on the other hand is planks cut from trees.

Examples of Raw Materials value chain
I am going to go through some ideas and identify the raw materials used. I am also not sticking to the strict definition of something that has to be manufactured. Remember in our Supply Value Logistics Chain, even if you carry out a service you will need materials. In our context, think of a raw material as an ingredient – a part or component of something.

Polish Tyres In Parking Lots
Equipment: Paint brush
Materials: Fireplace paint, thinners
Skills: Painting
The raw materials in that business are fireplace paint and thinners

Make and Sell Drinking Glasses Made From Bottles
Equipment: Bottle cutter
Materials: Empty glass bottles, fine sandpaper to smooth glass
Skills: How to operate bottle cutter
In that business, your raw materials are the empty glass bottles and the sandpaper

Start a Bread Making Business
Equipment: Oven, bread slicer (unless you selling whole loaves)
Materials: Yeast, flour, salt, sugar, plastic bags
Skills: Baking
In that business, your raw materials are the ingredients and the packaging.

Again you must be thinking we are deviating a bit here, with including packing. No, this is how you find opportunity within your Supply Value Logistics Chain. Look at very step of your supply and value chain.

Raw Material business ideas on Khoi Capital (strict definition)