Download - Lec 4-analyzing-supply-market
Analyzing Supply Market
A generic procurement cycle
A market exists where:There are two or more partiesEach party has something of value
to the otherEach party can communicate &
deliver
Each party is free to accept or reject an offer
1. …what & how much to buy?
2. …where to buy?
3. …when & how to buy?
The supply market influences decisions on:
Supply Market Analysis
Review of the structure, characteristics & trends of a market for a particular product or service
SupplyMarket Analysis =
Assess the ability of different markets to meet requirements Identify the markets which represent the best opportunity &
lowest risk for a purchase Identify new products & technologies Understand conditions & constraints related to particular
purchases
Reduce costs & risksIdentify opportunities
Factors to consider : Is it a new purchase item? When did you last review the market situation? How quickly are the market & technology changing? How much is being spent on the item (annual
expenditure)? What is the potential impact on the company if the item’s
supply targets are not met?
The supply positioning model
80% of items = 20% of value 20% of items = 80% of value
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Expenditure
ImpactL
Max.Min.
Routine
Critical
Leverage
Bottleneck
The degree of difficulty or uncertainty that you face in achieving your supply targets because of market conditions is called supply risk.
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I. Prepare for a supply market analysis
III. Forecast market developments
IV. Understanding what drives the market
V. Assess price
VI. Segment the supply market
VII. Screen out less relevant segments
II. Assess the degree and effects of competition
• What are your objectives?
• How much time do you have?
• What happens if you don’t do it?
• What information do you have?
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• Factors influencing the DEGREE of competition
• Risks & opportunities in markets with different degrees of competition
• Projection
• Expert opinion
• Supply market testing
• Product-market life cycle
• Differentiate products & services
• Develop new products• Take advantage of niche
markets• Secure manufacturing
flexibility• Control of distribution
channels
Market drivers are factors which generate a competitive advantage and include abilities to:
Cost of Production
Value to the Customer
Competition &Market Factors
PRICE
Segment when the market is sufficiently competitive to make it worthwhile
Segmenting means grouping together all suppliers for whom risks and opportunities are similar
Supply Market Segment
• Geographic location
• Technology
• Supply channel Different segments represent DIFFERENT risks & opportunities!!
Analysing each segment takes time! Don’t waste time on segments which are unlikely to be useful! Don’t segment:
• When there is only one supplier or one segment is not any different from another (in terms of risk & opportunity)
• Where certain countries, technologies or supply channels are not accessible to you(e.g., costs of transport is too high, you can’t use a certain technology, the quantities you require are not big enough to buy directly from manufacturers.)
I. Identify the types of supply risks & opportunities of
different segments
III. Further research the risks &
opportunities related to these events
IV. Build scenarios to assess the extent
of the risks & opportunitiesV. Identify which
supply targets are affected by these
risks & opportunities
VI. Determine how much the risks &
opportunities may affect your targets
VIII. Continue to monitor supply market risks & opportunities
VII. Select the segment(s) with the best balance of risks
& opportunities
II. Identify and screen the relevant
events in the segments
I. Identify the types of supply risks & opportunities of
different segments
M3:U4:4.2-2
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T
CEK
Political, legal and socio-cultural factors
Outbound logistics
Competition levels
Key inputs to the supply market
Economic & infra- structure factors
Technology factors
Political, legal and socio-cultural factorsP Factors to consider
Political stability Labour relations
The state of the relationships between governments
Threat of war
Legal framework for business
Environment, ethics and corruption
Culture, religion, andLanguage
Time zones
Outbound logistics
Factors to consider How they can impact upon supply¨
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ITC
OFactors to consider
Logistics Insurance services
Transportation infrastructure
Risk of pilferage
Documentation requirements
Availability of inspection and Testing Service
Competition levels
ITC
CFactors to consider
Number of Suppliers Bargaining power of Buyer
Overall Supply Vs. Demand
Key inputs to the supply market
Factors to consider
¨ Raw materials andcomponents
¨ Labour
Ksteel
Economic & infra- structure factors EFactors to consider
The Government's Business Development Policies
Finance and Banking
Foreign Trade Policy and Regulations
Basic Infrastructures
Level of Globalization and export trends
Technology factors
Factors to consider
TLevel of Technological InnovationsChoice of TechnologyProduct Life CycleMaturity of TechnologyComplexity of TechnologyEase of ManufacturabilityCost of Technology and its useOrganization’s experience with the technologyTechnical Suitability and Adaptability
Start with your own knowledge & common sense...
RiskII. Identify and
screen the relevant events in the
segments
Oppor-tunity
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Review information sources available to you
Analyse the information you collect
Select the events that represent significant risks or opportunities
III. Further research the risks &
opportunities related to these events
Quality performance
Availability & lead-time
Supplier responsiveness
Cost reduction
V. Identify which supply targets are affected by these
risks & opportunities
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Quality performance
Availability & lead-time
Supplier responsiveness
Cost reduction
V. Identify which supply targets are affected by these
risks & opportunities
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VI. Determine how much the risks & opportunities may affect
targets
VII. Select the segment(s) with the best balance of risks
& opportunities
Monitoring of supply risks & opportunities - when to do it?You are waiting to take a supply
decision
You have taken a decision, but wish to keep backup options under consideration
You are buying from a supply market that is relatively risky
M3:U3:5.2-1
WWWINTERNET
NET
• Specialised publishing houses
• Specialised newspapers & journals
• Chambers of commerce & trade support bodies
• Specialised trade & industry associations
• National purchasing & supply management associations
• Official foreign trade representatives
• Various international organisations• Your current suppliers (watch out for biased information)• Other buyers• Service organisations (e.g., freight forwarders & banks)• Fairs and exhibitions
• Consultancy firms
• Universities & local research organisations
• Your own company, purchasing department/staff, marketing department, production/engineers…
Check the reliability
Analyse & interpret
Organise what you have collected
ITC
Classify the information so that it can be easily found
Set up a small reference ”library” (a couple of bookshelves can be enough)
Subscribe to key sources
Get an Internet connection….
ITC
Thank you