It is this time of the year again when nights are long and we decorate our homes with all sources of light: Candles which have been around for many centuries, along with electric lights - be it ordinary ones or LED lights in various colors. This brings me to the thought about how mankind has searched for and developed all these sources of light. And how a good and reliable source of light has changed the entire way we spend our time, how we live and work.
Finding and developing new sources is critical for many processes. Think about all researchers and manufacturers using fetal bovine serum, human serum albumin or other raw materials subject to shortages.
Over the years I have been watching purchasers struggling with decreasing availability or increasing prices of the products they need for their company. The most common reaction to changes of such kind is to look for another place to buy. For a greater efficiency, an inquiry is sent to as many potential suppliers as possible. The expected result is to get as many responses as possible and increase purchasing options significantly.
This strategy works well as long as the product in question is not REALLY in shortage. In cases of temporary stock problems or disturbed relationship with the present vendor, contacting a large number of potential new suppliers works well.
However, the product may really be subject to shortage on a global market level. This happens when only a few true manufacturers exist worldwide and the rest of the suppliers are in fact only resellers. If one of the true manufacturers stops production for whatever reason this can influence the global supply. Here the classic sourcing strategy may even have an adverse effect. All companies that have received the new inquiry inevitably contact the remaining manufacturers thus creating the false impression of a much greater demand. The logical result of this “increased” demand – prices rise.
Who’s the winner?
I see also companies declaring high quantities of product they are willing to buy. They hope to get an immediate offer and a favorable price. In times when a product is abundant, this works well. On a supplier-dominated market this strategy is useless.
Real sourcing and shortage problems cannot be solved by simply intensifying the frequency and the number of inquiries. A smart and a different approach is required instead. Here a few things that can be done without creating panic on the market or wasting too much time and efforts.
- Analyse the market – what really caused the shortage?
- Analyse your needs – is there a replacement for the product is use?
- Analyse your strategy – do you access true manufacturers or mostly retailers?
- Analyse your stock and supply concept – do you make long term planning? Do you have a plan B?
If you don’t have the answers to all questions contact an expert. An expert will save you time and will look at the problem from a different angle. An expert can also take a completely different approach and make new and unexpected suggestions.
As the management books author - Oren Harari - once said, the electric light didn't come from the continuous improvement of candles.
A game change is needed. Now.
