For accurate costing, it is important that stock is held at multiple levels within the supply chain. A product manufactured today therefore does not necessarily consist exclusively of raw materials and components purchased at current prices.
Stock at MAG Finished products in our warehouse in Germany may originate from earlier production batches.
Stock at the manufacturer Finished products or semi-finished goods may also already be available at the manufacturer’s premises.
Copper and raw materials Raw materials may have been purchased weeks or months earlier at previous prices.
Plastics and insulation Plastics, PVC and insulation materials are also sometimes procured for stock.
Connectors and components Contacts, connectors, housings and other components may still come from existing stock.
Packaging materials Cardboard boxes, bags, labels and other packaging materials are also sometimes procured in advance.
As long as the manufacturer is still using, for example, copper, plastic, connectors or other components from previous stocks, these earlier purchase terms can continue to be applied to production.
Once these stocks have been used up, the required raw materials and components must be procured anew at the current terms and conditions. As a result, the production cost of a subsequent batch may change significantly, even though the product has remained technically unchanged.
This effect therefore does not only affect our stock in Germany. Raw material and component stocks held by the manufacturer can also mean that changes in costs only become apparent in the price of the finished product much later.