Rising leather prices and supply chain impact

An article in Bloombergbusinessweek (Sept 19, 2011) describes the surge in leather prices – 21% in 2011 and 43 % in 2010. The reasons (a) decreased beef consumption in response to health concerns and income slowdown and thus reduced cattle production (drops of 20 % in Italy and 13 % in France, (b) higher export duties for leather in India, Chin etc that are trying to protect domestic production, (c) increasing demand for leather luxury goods in China. The combination of lower supply and higher demand has been pushing up prices. The supply chain response has been to offer nonleather material (by Valextra) or move production to lower cost locations like Vietnam. Is the story of leather and the collateral impact of other commodities likely to repeat for other inputs with similar connections ? Given such conditions, why doesn’t retail price increase bring the supply and demand back in line ? Would you anticipate recycling leather from old bags to become a growing trend to increase raw material availability ?

About aviyer2010

Professor
This entry was posted in Global Contexts, Operations Management, Supply Chain Issues and tagged , , , , , , , , , , . Bookmark the permalink.

One Response to Rising leather prices and supply chain impact

  1. Mangesh Panditrao says:

    It would be interesting to see what other commodities are following similar trends in order to identify the next “leather”. As purchasing power increases in China and India, demand patterns will see a shift. Interesting read…

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