Market Size and Distribution
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Your network strategy has to be robust from your most pessimistic through to your most optimistic projections of demand.
The fundamental role of the Supply Network is to service a given geographical market at least cost.
A founding assumption must therefore be, the market:
- Product range;
- Volume trends;
- Geographical spread and centre of gravity.
Inevitably there is great uncertainty surrounding these projections:
- Mature product ranges may have uncertain rates of decline;
- Innovative ranges will have uncertain rates of growth;
- Penetration studies can be considered for NPI prospects or untapped geography.
Again, given the degrees of uncertainty involved combined with the significance to the strategic plan - we would recommend Risk Analysis testing of a statistical assessment of the markets.
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| Mini Case Study:
A major manufacturer of Dish Washing products looked seriously at migrating production from Germany to Poland. Direct labour rates were 10% of German rates (but indirects and managers' rates were much closer) - and it was projected that the growth in demand in Central and Eastern Europe would move the COG. However, in practice labour numbers are relatively low; Eastern European demand tends to be for cheaper lower technology products and the UK is a very major market. The net result was that the Polish economies were outweighed by distribution on-costs. The preferred strategy was to invest in the poorly laid out and cramped German facility.
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