Supply Market Analysis – Why Do We Need Market Intelligence?

Why do we bother to gather market intelligence on the strategic commodities we are sourcing? The answer is that if we don’t we may be exposed to unnecessary supplier risk and any competitive advantage we thought we had may be lost. Supplier risk can be present anywhere, anytime and with any supplier.

Supply Market Analysis vs. Market Intelligence

Supply market intelligence is a current buzz-phrase currently gaining rapid exposure. It is essentially an upgrade of supply market analysis and can be defined as the process of gathering, filtering, distilling and presenting information relevant to a company’s supply markets. The specific purpose is to support accurate and confident decision making in the procurement process. A properly executed and insightful supply market study requires that significant and disparate amounts of research materials be collected through primary and secondary research.

Traditionally, supply market analysis has included developing a commodity profile, examining cost structures, researching suppliers, and identifying key market indicators. Being able to able to assemble a supply market analysis for a given commodity is a skill that is essential for every supply chain professional to master

Primary and secondary research

Primary research is information gathered through interactions with other people typically through meetings, one-on-one structured interviews, focus groups, and surveys. Primary research with current and prospective vendors is often more valuable and insightful than secondary research. The deluge of information available on the Internet, both reliable and suspect, can be accessed equally by billions of users. Primary research is an essential element towards creating a competitive advantage.

This is the fun bit. Secondary research is information collected from existing literature, publications, broadcast media, and other non-human sources. This is generally easier to gather than primary and is often valuable in relation to the effort expended. Whether you are studying the market outlook for male personal hygiene products in Southern Africa for the next five years or an in-depth analysis of future capital flows and investment trends in hospital construction, it is all “out there”. A recent report on the South African economic environment predicts that the pharmaceutical industry will grow much faster than other sectors due to a strong continuing demand for primary healthcare level drugs, such as generics, antibiotics and over-the-counter remedies.

Intelligent steps to take towards really knowing your commodity

  • Develop the Commodity Profile

Find out the international product classifications and document the commodity definition. Consult widely and get a clear understanding of the important technical and quality issues.

  • Determine the Cost Structure.

Over and above the usual adding up of raw material costs, labour, transport, energy, overheads etc, you can be more innovative. Listed companies are required to publish financial statements and do presentations on their business results. Scour this information for clues to their cost profiles.

  • Research all Suppliers

This requires focus and effort and is an on-going process. Establish if the global market is fragmented or consolidated, where the low-cost suppliers are, possible new supply channels and any pending mergers or buy-outs. This is an area is where you may need help from the specialist organizations that provide news and intelligence services, especially where they target unlisted companies. Customized dashboards are available that are designed especially to track activity within your commodity. But at a price!

  • Identify Key Market Indicators.

The good news is that most global and regional market indicators are frequent, reliable and free. Economic and indicators track high level commodity prices, production rates, inventories, GDP and employment statistics. You can even set up alerts so that you don’t miss any key events or developments.

Should your organization be kind enough to provide you with analyst support or if you have excess time on your hands, you can delve into technical and detailed analyses for important commodities using SWOT analysis, Porter’s five forces and PEST. PEST stands for “Political, Economic, Social, and Technological analysis” and you can even upgrade it to PESTLE if you add Legal and Environmental impacts.

Whether you are based in Luanda, Lesotho or Lilongwe, you can have access to the same market information as the rest of the world. The difference is that you may not have the opportunity or the financial resources to source from outside Africa which limits your options. South Africa and Nigeria are the most developed markets and primary sources of supply for buyers in Southern Africa.

Supply market information challenges will always be with us

Identifying high risk suppliers is one of the major reasons why we undertake the laborious research into our supply markets. Risks can be mitigated to some extent through tracking and managing supplier performance issues and monitoring the changing financial status of key suppliers but this is not foolproof. It is necessary to have a Plan B ready where you have already identified alternative suppliers to replace or supplement existing suppliers. Avoidance of supply chain disruptions due to supplier failure is vital for business continuity.

Information overload is trap that it is easy to fall into, as is analysis-paralysis. Managing key suppliers by exception allows you to use your limited resources wisely. Continuous monitoring of high impact suppliers through the use of scorecards, graphs and charts helps ensure that you can store and share current information and provides an early warning system for senior management.

Sourcing managers, especially in Southern Africa, are doubly challenged as they are required to have a diverse supplier base. This can involve a time-consuming supplier qualification and record keeping process. Government regulations and economic development initiatives which are designed to offer supply opportunities to micro-, small- and women owned businesses need to be followed. In most African countries, a percentage of local content is an important requirement. All of these issues add complexity to the maintaining of a good supplier intelligence database.

Competitive advantage through knowledge and analysis

One’s analysis efforts should be focused on heavily concentrated markets where there a few large suppliers and also on highly fragmented markets where smaller suppliers can cause supply interruptions due to financial instability. Tracking of key market indicators can provide insights in supplier cost structures which helps determine if you are achieving the best possible deal.

An in-depth knowledge of the supply market dynamics in a commodity can reduce risk. By developing a comprehensive understanding of the number, type and structure of suppliers you can keep your options open and lower the risk of supply interruption.

Used within a strategic sourcing framework, a procurement person’s strong primary research skills and the ability to track a commodity can deliver competitive advantage. If you are naturally inquisitive and like to follow trends, none of this will even feel like work.

Strategic Planning – Why SWOT Analysis Is Important?

If you are planning to get yourself involved in the business world, you should know what is SWOT analysis and its importance. SWOT analysis has been around for so many years now. To be specific, people started using this tool around 1960s. It was developed by Albert Humphrey of Stanford University which was actually based on the Team Action Model research project. Basically SWOT analysis is considered to be one of the most essential tools that almost all companies use to carefully assess the industry. In addition, companies also use such tool to be able to come up with some strategies to keep up with the tight competition in the market.

SWOT actually stands for strengths, weaknesses, opportunities and threats. When talking about the strengths of a particular business, these refer to the products or services of the company, its reputation, its location, the years of experience and the expertise of the people working in such company. The strengths of the company are the things that make it grow and succeed. The weaknesses on the other hand are those things that have to be improved like a weak brand name, poor reputation and more. The absence of the strengths is basically the weaknesses or in other words, they are the complete opposite of the strengths. When it comes to opportunities, these may pertain to some changes in the company, the emerging markets and the technologies. And lastly, new competitors in the market, new regulations and increasing cost are among the things that can be considered under threats.

But is SWOT analysis really important for a business? The answer to this question is a big YES! It is actually known as the main component of strategic planning. This particular analysis is responsible of determining and evaluating the impact of different factors to a particular business – both internal and external factors. The internal factors are those that belong in the strengths and weaknesses while the external factors are those that are among the opportunities and threats. After the evaluation, a company will then be able to develop something that would determine the current status/condition of the market and then make itself more competitive.

However, although SWOT analysis is important, the strategies should not be based only on the analysis. Other important analysis on what should be done and what should not be done have to be taken into consideration as well. Bear in mind that the SWOT analysis will only provide a snapshot or a part of a big picture, just to give an idea on what are the areas that can be improved and many more.

To sum it up, SWOT analysis is really important for a particular business, regardless of its nature and size. So if you are just about start a business, you should be aware about this particular type of analysis – what it can do for your business, how it can help you become successful in your chosen industry, how come up with solid strategies and many more.

Cutting Edge Solutions Using CFD Analysis

Nothing has completely caused more changes in the world than science and technology. In fact, the advent of internet and computer technology has brought certain artlessness to the way things are done. But when science is seamlessly combined with computer technology, the revolution is better imagined, which is what CFD analysis has been able to offer to industrial engineering and the world of science as a whole.

Computation fluid analysis (CFD) is a subdivision of fluid dynamics that makes use of numerical methods and algorithms to provide cutting edge solutions, and also analyse issues that involves fluid flow. The use of computers is important because it helps to perform the calculations that are required in order to simulate the interface between liquid and gases with surfaces defined by boundary conditions.

Since the introduction of the first CFD analysis as governed by the early theories of Navier strokes equation, there has been dramatic growth in the last decades of the industry. CFD technology has been widely used in engineering applications such as automobile, aircraft design, oil drilling, HVAC, telecommunications, civil engineering and oceanography, amongst others.

More interestingly, with the modern structural organisation of today’s engineering firms, where off shore engineers are now more challenged than ever about precision in the midst of cost reduction, CFD has been able to help them provide affordable solutions to fluid dynamic problems.

One of the many benefits of CFD is the fact that it provides an accurate prediction of the type of design changes that are most important for enhanced performance; this it does without the lengthy process of installations of actual systems or prototypes.

Similarly, organisations that use computational fluid dynamics have been able to save more money for other research and development projects, as CFD saves them from costly experimentations.

Even with the increased availability of bespoke CFD software, many more organisations have been able to reap the benefits of Computational Fluid Dynamics. This software has been able to improve the accuracy and speed of complex simulation scenarios such as turbulent flows.

Apart from the bespoke system which gives users the advantage of more flexibility and specialisation, there are other types of CFD software which includes the commercial off-the shelf packages that are publicly available for a fee. Also, there is free CFD software which will require installation and validation before being made fit for the purpose for which it is intended.

It is without doubt that CFD has increasingly become a rapidly developing tool with an even greater potential of significantly impacting and adding value to the complex processes within many organisations. But exploring the full advantage of this technology will often require specialist scientific and IT skills, and there are numerous CFD outsourcing service provider firms that can add value to the whole process.

This has become even more important as many users now have their own special requirements, over and above the functions provided by a particular CFD tool. For instance, the race industry now demand specialised CFD analysis that can accurately predict the down force and drag that would be experienced by race cars at high velocities.