Supply Excellence — Shortages Aren’t Just for Raw Materials

Shortages Aren’t Just for Raw Materials

February 25th, 2008 · by Justin Sullivan · No Comments · best practices, supply market dynamics

The dip in soybean production caused by farmers gravitating to ethanol production got you down? Well, the 2/25 issue of Business Week (sorry it’s print only, but a PDF version of the article is here) highlights another potential shortage you might see in 2008: Television ad time.

The shortage is caused by the need for Presidential candidates to broadcast their message to us in those tasty bite-sized nuggets, the 30 second commercial:

Politicians are expected to spend $3 billion on TV ads this year, according to TNS Media Intelligence and the Campaign Media Analysis Group. The spending spree, up from $1.7 billion in 2004, will do more than raise the prices in the $26 billion TV spot ad market, where rates could double in contested battlegrounds such as Ohio and Florida.

Leave it to Spend Management leader Hewlett-Packard to offer strategies to manage this short term capacity constraint and prove that good sourcing is not just for procurement any more. Scott Berg, HP’s global marketing chief plans to use good sourcing practices in a non-traditional market:

Increasing the use of substitutes: HP will shift their focus to spend more on internet and radio ads.
Identify spot pockets of unused capacity: Berg’s team will identify local TV markets where candidates have dropped out of races, leaving inexpensive ad spots available for opportunistic buyers.

Obviously TV ad time isn’t a “commodity” many of you are regularly purchasing, but HP’s silver lining approach to market conditions shows that Spend Management isn’t just a procurement department goal. And you’ve got to admire their flexibility and creativity in adapting to external events. Certainly not bad goals no matter what you’re purchasing.

Justin Sullivan is a Senior Manager in Ariba’s Spend Management Services group. In addition to his strategic sourcing and technology expertise, Justin worked for a number of years in the White House Office of Management and Budget (OMB) where he analyzed the fiscal implications of Federal policies.

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