Market knowledge is power in procurement



procurement.jpgEffective procurement management requires procurement managers to approach their roles with a high-level view of supply markets and components that affect them.

This is owed to the evolving role and nature of supply chains and the fact that players are increasingly embedded in complex and globally dispersed supplier networks. Supply chains are increasingly multi-tiered and buyer/supplier relationships multi-faceted, said Nyasha Chizu, a fellow of the Chartered Institute of Procurement and Supply.


Satisfying organisational needs requires proactive and planned analysis of supply markets, leading to effective selection of suppliers. The objective of the exercise is to deliver solutions that meet agreed and predetermined levels of organisational needs.

Understanding supply markets is important for strategic sourcing.

Porter’s five forces is an effective tool for market analysis. A proactive procurement manager can acquire extensive knowledge of the degree of competition in the market.

Supply market structures range from monopoly to perfect competition: these market structures have a bearing on the availability of close substitutes and, consequently, the power of the supplier or the buyer.

A high level of competition creates more options for the buyer. But more options do not come on a silver platter: in fact, having more options implies more work for the buyer in the selection process, a process where it may be difficult for an ill-informed buyer to separate the wood from the trees and trees from forests.

A high level of competition is beneficial to proactive buyers: the speed of industry growth promotes innovation, increases product quality and, at the same time, reduces costs.

Industries in competitive markets have a high capacity utilisation rate that facilitates easy absorption of overheads, which reduces the overall costs of production.

All of this taken into account, informed procurement managers must understand their main product ranges in terms of the competition: buyers must have an overall understanding of their annual purchase volume in relation to the overall market production. This assists to determine the buyer’s control and power in a specific market.

The information on annual spend also assists in analysing risks in the supply markets and buyers can effectively craft appropriate strategies to mitigate them.

Furthermore, buyers can leverage competitive markets: when requirements are consolidated, industry standards emerge and bargaining power is inevitably increased.

Adapted from Nyasha Chizu’s article in NewsDay



Leave a comment

SmartProcurement Newsletter

Please enter your details below to receive the SmartProcurement Newsletter for FREE on a regular basis.

As part of the SmartProcurement Newsletter you will be receiving World Class Procurement News, Tools, Tips, Tactics, Procurement Training updates, Upcoming Events, and the latest Procurement Career Openings.

* Email Address:
* Title:
* First Name:
* Surname:
* Company:
* Country:
* Public / Private:



Career opportunites

Supply Chain Analyst

  • <500 000 Analyst Permanent Supply Chain Western Cape
R400 000 - R500 000 per annum.Location: Cape ...More

Commodity Manager

  • <500 000 Commodities Gauteng Permanent Procurement Consultant
R650 000 - R750 000 per annumLocation: Cape ...More

Logistics Manager

  • <500 000 Gauteng Logistics & Warehousing Operations, Planning & Inventory Permanent
Salary: R 800 000 - R 900 000 ...More

Demand Planner

  • <500 000 Gauteng Operations, Planning & Inventory Permanent Projects / Category Management
Salary: R 600 000 - R 650 000 ...More

Supply Chain Analyst

  • <500 000 Analyst Gauteng Permanent Supply Chain
R600 000 - R700 000 per annum Location: ...More

Commodity Manager

  • <500 000 Commodities Gauteng Permanent Procurement Management
R850 000 - R1 000 000 per annumLocation: ...More

Commodity Manager

  • <500 000 Commodities Permanent Procurement Management Western Cape
R700 000 - R850 000 per annum,Location: Western ...More

National Supply Chain Manager

  • <500 000 Across borders Permanent Procurement Management Supply Chain
R750 000 - R1 000 000 per annum,Location: ...More

Industrial Engineer

  • <500 000 >500 000 Industrial Engineer Operations, Planning & Inventory Permanent Western Cape
R450 000- R500 000 CTC per annum,Location: Western ...More

Commodity Manager

  • <500 000 Commodities Gauteng Permanent Procurement Management
Category: Procurement,Salary: R700 000 - R800 000 per ...More

Supply Chain Manager

  • <500 000 Gauteng Permanent Procurement Management Supply Chain
Category: Consulting,Salary: R750 000 - R800 000 CTC ...More

Logistics Manager

  • <500 000 Across borders Logistics & Warehousing Permanent Procurement Management
Category: Logistics,Salary: R900 000 - R1 000 000 ...More

Demand Planner

  • <500 000 Gauteng Operations, Planning & Inventory Permanent Projects / Category Management
Area of Specialisation: Planning,Salary: R500 000 - R650 ...More

Industrial Engineer

  • <500 000 Analyst Gauteng Industrial Engineer Permanent
R800 000 - R850 000 CTC per annum.Location: ...More

Security Manager

  • <500 000 Analyst Gauteng Permanent Procurement Officer / Specialist
(Total Cost to Company R350K - R550K).This is ...More

Operations Manager

  • <500 000 Gauteng Operations, Planning & Inventory Permanent Projects / Category Management
(Total Cost to Company R650k - R750k) excluding

Commodity Manager Raw Materials

  • <500 000 Commodities Gauteng Permanent Strategic Sourcing
(Total Cost to Company R980k - R800k) excluding ...More

Commodity Manager Logistics

  • <500 000 Commodities Gauteng Logistics & Warehousing Permanent
(Total Cost to Company R1mil - R900k).Industry: Engineering

Procurement Consultant

  • <500 000 Gauteng Permanent Procurement Consultant Procurement Management
(Total Cost To Company 550K - 450K) includes ...More

Commodity Manager MRO &CAPEX

  • <500 000 Commodities Gauteng Permanent Projects / Category Management
(Total Cost To Company 900k - 750k) includes ...More