Lead Category Manager Mike Petro explains how non-price factors indicate a shift from buyer’s to seller’s market conditions.
This segment is a clip from the LinkedIn Strategic Sourcing & Procurement group member conference call on commodities. You can stream the full replay here (embedded player top center). Request to join the group here.
Justin Fogarty is Managing [...]
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Yesterday, Apple confirmed that they purchased Intrinsity, a small company in Austin, TX known for their very fast performing mobile device chips. The NYTimes reports that the move helps Apple’s products, such as the iPad, hold a ~50% edge over competitors in terms of processing speed since the Intrinsity designed chip runs at about 1,000 [...]
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Another interesting take-away from Chris Sawchuk’s presentation at the Boston Spend Management Day earlier this week was his insight into what’s in store for most companies in 2010. According to Chris, the Hackett Group’s interviews with procurement pros have revealed that the vast majority of companies (I believe he said around 80%) reported they’ll have larger savings goals in 2010 than they had this year. Unfortunately, Chris also said few companies had concrete plans on how they would actually reach those goals.
This on its surface would be a troubling situation in any market. But when we consider the buyer’s market conditions that have given buyers tremendous leverage to reach their lofty savings goals this year, and the possibility that the tide may turn back towards the suppliers and inflation at some point in 2010, the lack of strategies may very well have some CPOs losing sleep as we inch closer to the new year.
So, I thought we should get input from Supply Excellence readers (and of course you can comment anonymously on an issue this sensitive):
Leave your answers, insights and/or questions in the Comments.
Justin Fogarty is Managing Editor of Supply Excellence. For any questions or feedback on the blog or its contributors, Justin can be reached at jfogarty[at]ariba.com.
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Despite continued sluggish newspaper sales, there is some good news for advertisers who utilize newspapers to reach their target audiences. Although it may seem counter-intuitive, given that newsprint prices – a major cost driver for the newspaper industry – are actually rising, the dynamics of the newspaper industry and the additional media channels that publishers hold, creates an advertising buyer’s market.
Business Standard sums up recent movement in the newsprint market:
Newsprint prices, which have remained depressed for the last three quarters, are set to move up by about 11 per cent in the next quarter. With international suppliers announcing a price hike of $50-60 a tonne from next quarter, domestic producers are contemplating a similar increase.
This development follows a series of international price increases that were enacted in the 3rd quarter of 2008 that cumulatively will raise newsprint prices by $180 a tonne in nine months.
Collectively, this represents a perfect storm of bad news for struggling newspaper publishers when we considering the rapid declines in newspaper consumption in recent years. However, these negative developments for publishers equate to an interesting buying opportunity for print advertising space.
Newsprint price hikes have historically been passed onto the consumer in the form of rising newsstand and subscription costs. However, in the modern, crowded media sphere of 24hr news channels, free online news sites, and even news delivered electronically to smart phones, there is no longer a captive audience for newspaper publishers to target. Circulation directors are reluctant to raise prices out of fear of accelerating circulation reductions to lower cost, often free, consumer alternatives. With pass through price increases non-viable options, publishers are providing larger amounts of printed space to advertisers. Ad revenue has long since eclipsed circulation as the key revenue generation lever for publishers.
Advertising rates depend to a large extent on circulation and the current downward spiral of newspaper sales provides advertisers a strong negotiating position. At most large newspapers, advertising revenue accounts for nearly four times the revenue that circulation produces. In fact, circulation revenue is frequently barely enough to cover the paper the news is printed on. Publishers have little choice but to keep the cost of the newspaper down to maintain a broad circulation while simultaneously selling ad space at reduced rates to maintain volume and revenue.
However, market dictated advertising rates are falling spurred downward by steady drops in ad sales within the industry this year. Q1 sales were down 29% from the same quarter a year ago, and Q2 were down 28%, according to the Newspaper Association of America. Most analysts expect around the same percentage drop for Q3.
Newspapers are increasingly dependent on ad revenue and market conditions are such that print media advertising is in the middle of a tremendous buyers market. The print media has been in transition for the last 10-15 years and most newspaper publications have expanded into multi-media in order to stay relevant and viable. Traditional newsprint is not going away and still offers a powerful tool for presenting products to customers. As such, savvy media buyers should be looking to leverage the downward movement of print advertising into more lucrative multimedia deals that utilize the full potential of a newspaper publisher’s multi-media capabilities.
Nick Cherrone is a Category Manager for business services in Ariba’s Global Services Organization. Nick has several years of sourcing experience with General Electric and as a logistics officer for the US Army. Nick is recognized by the Institute for Supply Management as a Certified Purchasing Manager (C.P.M).
Opportunity for Advertisers”
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With the drop in global consumer demand, well publicized glut of capacity in ocean freight and cost cutting objectives in many companies, we’ve been fielding a lot of questions about ocean freight contracts and securing lower long-term fixed rates lately. The market is at an low time low and now is the time to act, [...]
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Few, if any, people still deny that US healthcare costs put the nation at a competitive disadvantage, wreak of inefficiency and must be confronted soon. And as Washington begins to debate the direction the nation will move, PBS Frontline’s Sick Around America program last night showed us the magnitude of the challenges ahead:
And while many [...]
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We’ve looked at why now is a good time to address legal services spend (down economy, rising unemployment) and how to approach it (alternatives to the billable hour). Now, it’s time to push firms to reduce charges, boost efficiency, and in some instances, stop placing junior staffers on your accounts. All of this can [...]
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The global economy has been experiencing an unprecedented tough times. Sales are down substantially for most industries except education and affordable food chains. As a result, purchasing volume is down. In many instances, such the auto industry, volume is down by 50% or more. Purchasing organizations with shrinking business find themselves with several suppliers for [...]
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Last week, I made the case for why it’s a good time to address legal services spend. Rising unemployment and declining revenues in the legal field provide opportunity to finally address this category, which has been historically treated as a 3rd rail. Whether you’re seeking to find a new firm or looking to change your [...]
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The NYTimes ran an interesting article on Google’s attempt to mine the “deep web”, that area beyond strings of simple keywords where complex questions are answered. It’s no easy task. Logic, analysis and context are tough things to perfect and scale for web crawling bots. So despite recently indexing their trillionth website and revolutionizing access [...]
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