Market pressures force daily decisions with major tradeoffs in the world of electronic components purchasing. These decisions are impacted by the unique biases of the buyer. Lifetime buy events raise the stakes and bring biases into greater focus.
Balanced supply forecasting: the holy grail of procurement. Cost reduction, timely order fulfillment, and satisfied customers all await those who can achieve the proper balance. Planning for supply and demand of electronic parts involves intense market knowledge and strategy.
Through extensive experience, we’ve observed that organizational biases often inform decision-making strategies. Those biases come into sharp relief when lifetime buy decisions are on the table. Knowing and understanding common buyer biases can help you strategize around lifetime buy events.
The three buyer types: understanding common biases
To simplify the vast field of unique players in procurement, we’ve broken it down to three major categories of buyers that we’ve encountered during lifetime buy events. Each buyer profile we’ve identified has its own strengths — and ways to improve on the quest to balanced supply chain forecasting.
Buyer #1: Don’t stop the line
Often buyers believe that the wrath of management and praise from sales comes primarily from making sure that enough material is on hand to meet production goals. When faced with a lifetime buy event, this buyer will bend strategy towards ensuring enough parts are on hand in the future.
While this strategy is proactive, it does carry risk. Buyer #1 will need help venting excess inventory at some time in the future. Getting a good ROI for excess inventory then becomes critical. While we are currently in a shortage market, swings will occur in the future. Taking time to consider a plan for eliminating excess inventory in the future will mitigate Buyer #1’s risks.
Buyer #2: Inventory is not your friend
Keeping inventory to a minimum whenever possible is Buyer #2’s mission. In fact, this buyer’s performance metrics may tie in directly with their ability to turn inventory and keep their company’s working capital moving. This common lifetime buy event strategy creates pressure to fill shortages in the future.
Buyer #2’s strategy will likely need to evolve when faced with current market shortages. Buyers with a lean inventory approach should keep a close eye on establishing and maintaining the relationships they need for ongoing procurement in a shortage market.
Buyer #3: Believing the forecast
The third buyer walks the tightrope between forecasting and reality. Buyer #3 seeks to balance production needs against working capital pressures caused by excess inventory. Inevitably, after a lifetime buy event this buyer will face imbalances between what should have been and what actually was.
Confronting the reality of how a forecast plays out builds knowledge and resiliency — but it also requires a nimble response. Independent distributors can assist this buyer in balancing inventory to production targets, but it’s worth investing in these relationships up front. Establishing strong connections to ease the forecast/reality gap is critical.
Pair your strategy with support to succeed with lifetime buy events
When facing a lifetime buy event, it’s helpful to understand the built-in biases that shape decision making. To stay nimble, buyers don’t need to change their style, but rather prepare to adjust course later with the help and support of partnerships with independent distributors.