The Procurement Beige Book: Summary Sheet (Q2, April-June)

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By: Beroe Inc --

25 July, 2021

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The Procurement Beige Book – Q2 (April–June) 2021
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procurement beige book

By Valekumar Krishnan, Vice President, and Madhavan Kutty, Digital Transformation Lead


(NOTE: The Procurement Beige Book will be available on Beroe LiVE.Ai, the next-gen Procurement Intelligence platform.)

The Procurement Beige Book is a quarterly publication of Beroe that assesses and reports the level of favorability in sourcing a comprehensive set of commodities, materials, and products and, services. In other words, it shows whether the sourcing conditions are favorable, unfavorable, or neutral for categories.

The Methodology

beige book

Category Softness: Beroe tracks the movement in price, input cost, supply-demand gap (or demand, in the case of categories where supply is largely elastic), and market competition and identifies whether each of these parameters is favorable, unfavorable, or neutral based on the direction (increase or decrease) and magnitude of change. The level of favorability of the four parameters is combined to provide a unique indicator we call Category Softness. Higher category softness indicates more favorable sourcing conditions.

Roll Up: Each category tracked is part of a portfolio of similar categories, and a collection of related portfolios constitute a cluster. The level of favorability across the four key parameters for each category in a portfolio is used to arrive at the level of favorability and overall softness at a portfolio level. The relative significance of each category in a portfolio is considered in this roll-up. The process is repeated with related portfolios within a cluster to arrive at favorability and overall softness at a cluster level.

Scale & Scope

The Procurement Beige Book covers softness data for 389 categories, 53 portfolios, and 19 clusters. Softness dashboards are available for 319 categories. Our analysts track a minimum of 30 to a maximum of 140 data points per category to provide softness data and dashboards.

Summary

Overall, when all clusters are considered together, the category softness continues to be neutral this quarter.

Unfavorable sourcing conditions are not witnessed for any cluster. However, worsening conditions, from favorable to neutral, in critical clusters with broad exposure like Freight Services and Packaging will negatively impact most industries.

Overall, the category conditions worsened marginally in clusters like chemicals, mining, manufacturing, marketing services, and MRO, although they remain neutral. However, important direct-spend clusters, like metals & minerals, agro, pharma R&D, and the IT – software, infrastructure & services clusters witnessed improvement in category conditions, although they continue to be in the neutral band. Conditions in Oil Exploration & Production cluster remain stable and favorable for procurement in Q’2 2021.

Clusters witnessing worsened conditions also experience favorable or neutral supply-demand situations at the portfolio level, indicating a potential improvement in category conditions in the ensuing quarters.

Sourcing Conditions Snapshot

 

Improving

Stable

Worsening

Categories

98

218

73

Portfolios

11

31

11

Clusters

0

19

0

 

 

Favorable

Neutral

Unfavorable

Categories

45

323

21

Portfolios

5

47

1

Clusters

1

18

0

 

Chemicals:

The conditions worsened marginally in the Chemicals cluster level in four out of nine portfolios, improving in three, and three remaining stable. Although the cluster as a whole and all nine portfolios fall in the neutral band, prices and input costs have increased. They are unfavorable across portfolios like elastomers, fertilizers, pigments, resins, and solvents. However, the supply-demand situation is neutral to favorable across all these portfolios, indicating a potential softening shortly.

Adverse sourcing conditions are driven predominantly by price increase in categories like caustic soda, sulfuric acid, urea, acetone, polycarbonate, and resins.

Metals & Minerals:

The metals & minerals cluster conditions improved significantly, with portfolios experiencing a mix of favorable and neutral sourcing conditions. While the metal portfolio remains stable and falls in the neutral band, improvement is driven by the minerals portfolio, where conditions have improved significantly to become firmly favorable. However, price and input cost movements are unfavorable across the base and ferrous metals. Unfavorable price and input cost conditions continued in this cluster for the past few quarters and could threaten a pull toward unfavorable conditions. However, the supply-demand situation and market competition trends favorably signify a mild softening if these conditions prevail in the ensuing quarters.

Mining:

The conditions in the mining cluster deteriorated slightly. Although sourcing conditions are neutral, all portfolios witnessed a marginal worsening. Price and input cost movements are unfavorable across equipment, consumables, and services portfolios. But the supply-demand situation and market competition are neutral or favorable across these portfolios. Although improvement is not anticipated in the equipment categories, it is expected in the supply-demand situation and market across the more volatile consumables and services portfolios in the mining cluster.

Industrial Manufacturing:

The worsening of category conditions continues at the industrial manufacturing cluster level. Although all portfolios remain neutral, the continuing decline in softness pushes the cluster toward the unfavorable territory. The supply-demand scenario in the electronic components portfolio is expected to continue in the neutral to the unfavorable territory for at least the next three quarters. Although all portfolios fall in the neutral band, input cost movement is unfavorable across industrial equipment, industrial processes, and mechanical components portfolios. However, the supply-demand index and market competition are stable or favorable across these portfolios and offset the negative impact of input cost. A stable to favorable supply-demand index for critical inputs in electrical and mechanical components could accentuate positive supply-demand situation and market competition and drive improvement in subsequent periods.

Energy:

The category conditions remained stable at the energy cluster level. Overall, the renewable and non-renewable energy portfolios remain stable and neutral. The price and input cost movements, supply-demand situations, and market competition remain neutral to favorable at the portfolio level. Although all portfolios fall in the neutral band, electricity witnesses unfavorable input cost movement and the supply-demand situation is unfavorable for diesel. However, price and input cost indices are favorable for natural gas. The continuing unfavorable conditions in the two critical and widely exposed energy categories could hamper further softening or worsen sourcing conditions in subsequent periods.

AGRO:

The conditions in the agro commodities cluster improved considerably, with 6 out of 10 portfolios experiencing improved sourcing conditions and four remaining stable. However, although all portfolios fall in the neutral band, portfolios like cereals & grains, dairy, meat & poultry, and oils & fats have experienced unfavorable price and input cost movements, with oils & fats witnessing adverse supply-demand conditions. Overall, the continuation of unfavorable price and input cost movements in this cluster could threaten deterioration toward unfavorable conditions. However, the supply-demand situation and market competition are neutral to favorable across 9 out of 10 portfolios, signifying a further improvement if these conditions prevail in the ensuing quarters.

Packaging:

The category conditions at the packaging cluster level worsened. Although the three portfolios of flexible, rigid, and paper packaging remained neutral, price, input cost, and supply-demand indexes are unfavorable in each of these portfolios. Additionally, although all portfolios fall in the neutral band, input cost movements were mildly unfavorable for pulp, paper, and corrugated boards. The continuation of such conditions in these critical and widely exposed categories could worsen sourcing conditions at portfolio and cluster levels in the subsequent periods.

Pharma R&D:

The category conditions at the Pharma R&D cluster level improved marginally. Contract research organizations, drug manufacturing services, pharma material and formulations, and medical equipment and supplies portfolios remain neutral—price and input cost indexes continued to be neutral in each of these portfolios. Although the price index is unfavorable for the contract research portfolio, the input cost index, demand index, and market competition improved at the portfolio level. Although the supply-demand situation was under pressure in three out of five portfolios in the past, conditions may have stabilized, and no immediate worsening is anticipated in this cluster.

Exploration & Production:

Overall, the exploration & production cluster conditions remain stable and favorable, with the oil & gas services portfolio witnessing an improved input cost index compared to Q’1 2021. The price and input cost indices stabilized in both portfolios in Q’2 2021, while the supply-demand index remained stable throughout 2021. The improving market competition and stability in rice, input cost, and supply-demand indices across both portfolios indicate further softening of category conditions in the subsequent periods.

INDIRECTS:

The conditions across indirect clusters and portfolios are largely stable and neutral, with 8 out of 10 clusters remaining stable in the neutral band. But freight services witnessed a considerable decline from favorable to neutral conditions vis-à-vis Q’1 2021. This decline may impact industries across the board due to the relatively broad applicability of these portfolios across industries.

Marketing Services: A marginal worsening was witnessed due to adverse sourcing conditions caused by a sudden increase in demand for advertising and communication categories and a slight increase in salary cost for critical agency roles.

Corporate Services: Stable and neutral conditions are witnessed. Demand for travel categories continues to be low but increasing.

Staffing Services: Conditions are stable and neutral. Price, input cost, and demand for temporary labor have stabilized in Q’1 and Q’2 2021, indicating a stable outlook for subsequent periods.

Employee Benefit Services: The conditions continue to be neutral at the portfolio level due to the worsening conditions in learning & development being offset by an improvement in the corporate health and wellness category

Banking Services: The conditions are stable and neutral. Positive conditions are likely to continue in subsequent periods.

Freight Services: The conditions continue to be neutral, despite a marginal worsening of conditions at the portfolio level with adverse price movement in the air and ocean freight categories.

IT – Software, Infrastructure & Services: The conditions are stable and neutral. Positive conditions are likely to continue in subsequent periods.

Facilities Management: The conditions are stable and neutral. Positive conditions are likely to continue in subsequent periods.

MRO: The conditions are stable and neutral. Positive conditions are likely to continue in subsequent periods.

Engineering & Construction: The conditions are stable and neutral. Positive conditions are likely to continue in subsequent periods.

Category Highlights:

In stainless steel, tin, disposable gloves, face masks, barley, corn, starch, wheat, soybean, coconut oil, rapeseed oil and meal, sulfuric acid, epoxy resins, HDPE, LDPE, LLDPE, polycarbonate, polystyrene, acetone, lotion pumps, and learning & development, the category conditions are unfavorable.

The category conditions are favorable in rare earth elements, clinical IT services, gene therapy trials, patient affordability, pharmacovigilance services, analytical testing services, cellulose ethers and its derivatives, vitamin B, hops & adjuncts, rice, almonds, cocoa, apples, strawberries, tuna, methanol, methyl ester sulfonate, PE films, polybags, pressure-sensitive labels, shrink films, stretch films, prefilled syringes, vials and ampoules, natural gas, anti-money laundering software, 3PL services, commissioning services, engineering, and design services, general/ civil construction services, and storefront design & installation services.

Nickel, rare earth elements, ventilators, carrageenan, palm kernel oil, tallow, glycerin, sugar, methyl isobutyl ketone, phenol, natural gas, and corporate health and wellness management witnessed much improvement in category softness.

The category softness worsened in pipes, valves & fittings, disposable gloves, face masks, Ibuprofen, soybean, rapeseed oil and meal, sulfuric acid, epoxy resins, HDPE, LDPE, and LLDPE.

 




D

Deborah Woolley

Can I please get a copy of the full report? How can I receive this quarterly?

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O

Oscar A Morera

How do I get a copy of the full report?

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R

Rishay Naidoo

Sugar

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S

Shirley Mower

Can I please have a copy of the full report?

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J

Jeanette Jones

Excellent summarized data. Thank you for sharing!

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