Demand factor - High quality raw materials


High quality raw materials (HQRM) - one of the key elements GMC simulator, which must be applied properly. HQRM influence on sales in the current period, there is no residual effect. The residual effect is possible only when the product is not implemented with HQRM and lay in stock. So it will affect on sales in future periods until it will be completely sold from warehouse.


Elasticity of demand from high quality raw materials

Vertical - relative change in sales compared to test company. Horizontal - absolute value of HQRM.


Dependence can be considered as proportionately adjusted for competitors in the group. Effect of HQRM differs for each of markets and products. Strength of the effect among markets - Nafta, EU (1.67 times wearker than Nafta), Internet (1.67 times weaker than EU).

Strength of the effect among products - product 1, product 3 (1.5 times weaker than product 1) product 2 (1.67 times weaker than product 3).

Despite strong effect on sales from the HQRM, it can be applied propely only with low SPOT price of raw materials. Because additional costs are added to the costs of production - amount of raw materials * SPOT * 0.5

Elasticities for each scenario are unique.



  1. There is no residual effect on demand from premium materials
  2. Dependence of demand on premium materials is expressed by a linear function
  3. The effect on demand from premium materials differs by market and product
  4. The dependence of demand on premium materials is influenced by competitors in the group


HQRM was linked with funny bug in GMC simulator. Calculation of stocks cost in the warehouse was provided with share of products with HQRM only in current period (example 20%) - what does it mean? Application of HQRM in production increases final cost of products. If company has not sold product in current period, it remains stored in warehouse. If HQRM will be increased (example 50%) in the next period, value of products in stock will be increased by the difference between previous and current HQRM (50% - 20% = 30%). Remember that calculation of the company's profits in the current period also consists of difference in the balances of stock between previous and current period, where increase in stock value in current period -  becomes pure profit. This is how was made brilliant in its simplicity strategy - make huge warehouse products with HQRM 0% and increase HQRM to 100% in 5 period, get from nowhere millions of additional profit, due to the rising cost stocks and leaving no chance to competitors. Nowadays bug has been fixed.


Automatic demand forecast based on high quality row materials is built into the Calculation model, which can be purchased in our store.