Importance of Supply Market Analysis

Importance of Supply Market Analysis

Reasons and benefits for analysing supplier markets include;

a) Better knowledge of supplier strategy.

This helps in the following ways:

1. Valuable information about supplier’s strengths and
   weaknesses is made available.
2. Identification of comparable substitute goods and services that could offer better value for money.
3. Identification of suppliers that have embraced technology in comparison to others.
4. Identification of opportunities that reduce the cost of purchasing goods and services.
5. The buyer is able to recognise all potential suppliers.
6. The importance of the buyer as a customer for the supplier is emphasised.

b) Manage risk for the buyer.

This helps in the following ways:

1. Identification of opportunities required to increase the supplier
   base in order to meet the buyer’s needs.
2. Contributes to the development of specifications in order to encourage competitive offers and prevent unfit products and services from being delivered.

c) The buyer is more informed.

This helps in the following ways:

1. Market analysis assists the buyer to understand how technology and other factors are driving changes in the market for the goods and services it requires.
2. The buyer understands how suppliers price goods and services, and how they set service quality and standards.
3. Buyers are better able to develop tenders that reflect conditions in that market because they understand markets and suppliers.

d) Opportunities to adhere to government policies are identified.

This helps in the following ways:

1. Government policy requires value for money from procurement functions in order to achieve governmental objectives.
2. Government objectives are achieved when buyers are tendering because of the availability of market knowledge and supplier capabilities.
3. Small and medium enterprises can get support to grow when procurement assist in the development of initiatives concerning the environment or society.
4. Procurement can take advantage of the changes in environmentally friendly technology that could help governments to achieve their environmental and sustainability goals.