Essay on The Market-driven Supply Chain

By Mark L. Seaver

The Market-Driven
S

ound decisions are not made in a vacuum, nor are they based on gut feeling, intuition or even pure judgment. There is simply too much risk. Today’s competitive environment and the ever-increasing costs attributed to poor decisionmaking require fact-based managers who demand awareness of the forces shaping their business environment.
As strategic sourcing has grown into a common strategic business tool, decision risk has increased and decision variables have multiplied. Complicated interactions between industry forces like buyer-versussupplier power, the availability of substitutes and the pace of technological advancement occur on a global scale. Thus, the centralized decisionmaking of a CPO now impacts an entire organization.
With so much at stake, supply managers find themselves asking an increasingly

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Inside supply management

FEBRUARY 2007

broad array of questions that stretch not only across their enterprise but beyond into the comprehensive network of suppliers and markets that now support them. New questions include: How do I stay abreast of major market trends so I can proactively manage my commodities? Which trends should I adopt verses avoid? How do I keep a current view of my addressable supply base? What are the early warning signs of a high-risk supplier? How do I prove my effectiveness at driving competitive cost advantages? Am I buying from the best place in the world at the best price?

Turning to a New Discipline
CPOs and their staff are now turning to a classical marketing discipline to help answer those types of questions. Once common only to customer-facing marketing
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Supply Chain
“ he forces of the market are just that:
T
They are forces; they are like the wind and the tides; you ignore them at your peril. Find a way of ordering your life that is compatible with these forces, indeed which harnesses these forces to [your] benefit.”
— rnold “Al” Harberger, professor emeritus, University of
A
Chicago, speaking in Commanding Heights: The Battle for the World Economy, a PBS series

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February 2007 Inside supply management

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[continued from page 20]

executives, brand managers and corporate strategists, market intelligence (MI) is expanding to serve new strategic audiences.
What is market intelligence? Generically speaking, MI is the process of collecting and analyzing data to provide objective insights on the business environment. It is an intellectual resource for business innovation. For the supply chain, this means new ways of thinking about the markets and suppliers that companies do business with to make smarter strategic decisions.
Demand-side practitioners have long argued that properly understanding economic forces, demographic trends, customer buying patterns, product substitutes and competitive positioning dramatically improves chances of company survival and new product success. Today, customer tastes change and competitors respond at such a rapid pace that the modern marketing manager requires a constant flow of MI to fine-tune the marketing mix. Brand managers, for example, routinely ask for insights into the following: Who are the customers? What are their wants and needs?
How should we reach them? Who are we competing with? What strategy should we use to win? What products/services should we offer?
Can Market Intelligence
Improve the Supply Chain?
The modern supply manager operates under similar conditions. To support a procurement process that must continuously improve and re-evaluate its activities, a manager needs trusted real-time insights into the context surrounding his or her own business. Without context, a manager is effectively making decisions in the dark. MI provides illumination in the form of intelligence about where your markets are going and which suppliers are

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