What Factors Affect Market Sensitivity In Procurement?
Procurement professionals play a crucial role in any business, ensuring that the necessary materials and services are acquired at the best possible price. However, navigating a rapidly-changing market can be tricky, as prices fluctuate based on different variables. In this blog post, we explore what factors affect market sensitivity in procurement and how businesses can adapt to these changes to stay ahead of the curve. So grab your coffee and join us for an insightful discussion!
What is market sensitivity?
In business, market sensitivity is the degree to which a company’s sales and profitability are affected by changes in the overall economy. For example, a company that sells luxury goods may be less sensitive to economic fluctuations than a company that sells essential goods. Market sensitivity is an important consideration for companies when making decisions about pricing, product mix, and other factors.
There are a number of factors that can affect market sensitivity, including:
– The type of product or service being offered
– The overall state of the economy
– The current level of competition in the market
– The target market for the product or service
– The price point of the product or service
How does market sensitivity affect procurement?
When it comes to procurement, market sensitivity refers to how much changes in the market will affect the prices of goods and services. For example, if there is a sudden increase in demand for a certain product, then the prices of that product will likely increase as well. This is why it’s important for procurement teams to keep an eye on market trends so that they can anticipate these changes and adjust their budget accordingly.
There are a few factors that can affect market sensitivity, such as the time of year, global events, and local events. For example, demand for certain products tends to be higher during the holidays, so prices will usually be higher during this time as well. Global events can also affect market sensitivity; for example, if there is a natural disaster in another country that affects the supply of a certain good, then the price of that good will likely increase globally. Local events can also have an effect; for example, if there is a major event happening in one city that requires a lot of supplies (such as a concert or festival), then the prices of those supplies will likely go up in that city as well.
Procurement teams need to be aware of these factors so that they can plan accordingly. If they know that prices are going to increase due to seasonality or global events, they can budget for it ahead of time. If they’re caught off guard by a sudden change in market conditions, they may end up overspending or underspending
What factors influence market sensitivity?
When considering market sensitivity in procurement, there are a few key factors to keep in mind. The first is the overall health of the economy. If the economy is struggling, businesses are typically more cautious with their spending, which can lead to less demand for goods and services. Additionally, geopolitical factors can influence market sensitivity. For example, if there is unrest in a particular region, businesses may be hesitant to do business there, which could lead to changes in the market. Additionally, technological advancements can also affect market sensitivity. As new technologies emerge, businesses may be more likely to adopt them, which could lead to increased demand for certain products or services.
How can market sensitivity be managed?
There are a number of ways in which market sensitivity can be managed in procurement. Firstly, it is important to have a clear understanding of the factors that can affect market sensitivity. These include the type of product or service being procured, the level of competition in the market, the economic climate, and the buyer’s own objectives and preferences. Once these factors have been identified, it is possible to put in place measures to mitigate their impact. For example, if a particular product is particularly sensitive to market fluctuations, it may be necessary to procure a larger quantity than would normally be required in order to protect against future price increases. Alternatively, if the buyer is seeking to maximise value for money, they may choose to source from a supplier who offers flexibility on pricing. In any case, careful planning and analysis is required in order to minimise the risk of overspending or under-delivering on procurement objectives.
Conclusion
In conclusion, market sensitivity in procurement is a complex issue that can be affected by many different factors. It’s important to understand how these factors influence the way you buy and sell products so that you can make the best decisions for your business. By taking into account political and economic conditions, pricing trends, supplier relationships, and other variables, companies should be able to effectively manage their market sensitivity in order to get optimal results from their procurement processes.