THE DATA PROJECTOR MARKET

Alset recognises that mini data projector demand is growing rapidly, although actual numbers are difficult to obtain. The latest figures show the market is $13 billion dollars in total, with a number of large players and then many small players. One of the challenges Alset faces, and perhaps a major reason why Alset may want to quickly "lock in" supplier capacity, is that other industries use the same miniature data projector as are used in the SPARKi. In particular, virtual reality gaming producers are moving aggressively in the data projector supply market. It has also been identified that Apple have invested heavily into research and development as to personal use of the iPad having a data projector for users to watch downloaded movies or pay television without a monitor. 

Another risk is the potential for quality problems on new electronic components as technology for miniature units is still in its infancy, although strong growth of the consumer electronics data projector industry. Alset must share their market with the growing virtual reality gaming and mobile phone markets, and assess their relative leverage in the market given other market demands for data projectors.

 

Suppliers of data projectors are often the same as suppliers of digital still or video camerasdue to the same components and similar manufacturing and assembly processes. These digital cameras capturing devices are similar to the ones used in an actual camera, in addition to many brand name laptops for people to video conference, Skype or Zoom. There is a myriad of specific electronic and subassembly components used as raw materials consumed to manufacture data projectors, with many suppliers all over the world producing on mass scales. 

 

The decision to outsource the miniature data projector resulted from an executive-level insourcing / outsourcing study that concluded the cost to manufacture these in-house was highly prohibitive, with initial analysis identifying more than two million units manufactured per annum would be required to be anywhere near cost competitive. The product requires production capabilities that are far beyond Alset's current expertise. Marketing estimates
that first year demand for the SPARKi, and therefore the data projector, would be approximately 500,000 units, with a 20% growth expected for year two 

 

THE SOURCING PROCESS

Alset relies on cross-functional commodity teams to develop sourcing strategies for key purchased items. Executive management views the digital data projector supplier selection decision as a critical part of the SPARKi development. 

After being involved in an initial product development team which commenced in mid-2022, Procurement researched the market in September 2022 and found that suppliers of data projectors are generally the same suppliers of digital cameras due to the similar technologies. Components for the miniature digital projector are common to producing miniature digital still or moving cameras. The technology in digital cameras has matured, so
more technical suppliers were moving into the less developed area of digital data projectors. 

 

An initial search of digital camera manufacturers by Procurement occurred during September and October 2022 including sources such as internal subject matter experts, Dun and Bradstreet, Bureau van Dyke, Global Edge, various government sources, chambers of commerce, electronics and computer trade journals, professional associations and searching the internet. This market intelligence estimated that the market size was approximately $13billion in the financial year 2022. Suppliers of digital camera capturing devices (and hence potentially data projectors) was initially 87 around the world. 

 

During the months of September and October 2022 you attempted to contact all these 87 suppliers through email or other forms of communication asking if they supplied data projectors, and received 43 positive responses. You were successful in procuring (through either a free sample, or buying through a purchase order directly or through an intermediary) up to 5 specification equivalent items from 34 of these suppliers for
Engineering to test, review and provide recommendations. Although some suppliers were not keen about providing such a low quantity order, if they completely refused to assist at all you assumed that they may not be interested in additional business.
 

Engineering supported the Procurement team's preliminary efforts by approving purchasing off-the-shelf data projectors for testing. This helped determine if the suppliers had a product that initially satisfied Alset's expectations. Relying on product samples, while providing preliminary insight into the capability and technology of each supplier, was not sufficient to support a final supplier selection decision. Engineering have shortlisted to the following suppliers having the minimum specifications required, in order from 1 (being best) to 13 (being the lowest, but still acceptable). Engineering commented that there was a large difference from the 13th supplier in their ranking to the 14th, and they would not recommend extending the list. They completed this assessment over a quiet period from mid-November to mid-December 2022, ready for Procurement to analyse and determine the sourcing strategy to approach the market.
 

RANKING	SUPPLIER	LOCATION
1	Sloan Capability	Amsterdam, Netherlands
2	DragonReid Electrics	Taipei, Taiwan
3	Calvin Projections	Barcelona, Spain
4	Taegeuk Nangja	Seoul, South Korea
5	FernFuel	Auckland, New Zealand
6	Nadeshiko Tech	Hitachi, Japan
7	Gaffney Tech	Auckland, New Zealand
8	Wolfconn	Bangalore, India
9	Crypto Technologies	Shanghai, China
10	Matildas	Port Kembla, NSW, Australia
11	LexiLogic	Guangzhou, China
12	Lonhro & Co	Silicon Valley, USA
13	Gunther Data Capture	Munich, Germany

All items would require a slight modification which was seen as simple for any manufacturing supplier. Any minor modification would require tooling - an additional machine on the suppliers manufacturing line to place a bracket to the rear of the component so that it could be fixed into the socket of the SPARKi. Tooling could take a number of weeks or months prior to lead time and delivery. The team believe we should conservatively allow more time
rather than minimum in case suppliers had restrictions for operations to invest capital for tooling.

 

Operations have asked you whether they should have single or multiple suppliers and how any requirements would be split proportionally between them at length. Having two or more suppliers would mean tooling costs for each supplier (as tooling would have to be made to each suppliers' plant). Due to the added complexity of monitoring quality issues, operations said that additional resources may be required to be employed in the warehouse if there was more than one supplier to manage stocks.
 

After the Sourcing Strategy was approved by the Lead Team on the 5th December 2022, the team sent a confidentiality agreement to the 13 suppliers endorsed by engineering, advising they were sending an RFI and required the company to sign prior to providing them the information. This confidentiality agreement was to attempt to keep the intellectual property of the SPARKi in confidence as the intent was to provide the basic specifications required for the tooling. Wolfconn refused to sign the confidentiality agreement due to company policies not allowing them and were removed from the shortlist. 

 

The RFI was developed and sent on the 2nd January 2023, requesting the 12 suppliers to provide basic information regarding their company, indicative pricing on the specification and interest in progressing as part of the process. The reason the team conducted an RFI was to shortlist suppliers based on the indicative pricing and to provide further information from which to build an RFT. The RFI allowed 3 weeks as the maximum time to respond.
 

By 23rd January 2022, eleven of the suppliers replied with nine of the suppliers indicating pricing, although not all cost competitive and within the initial target landed cost of below $160.

Lexi Logic replied indicated no pricing and that they were not interested in progressing. A follow-up phone call indicated that they were simply using the RFI as market intelligence although would not be using the information to share with others due to the confidentiality agreement. 

Sloan Capability was disregarded in the shortlist as they advised their pricing would not be in the target range and were honest to say it would not change. 

Lonhro & Co were also disregarded as the landed cost would have completely been outside the target range. 

DragonReid Electrics stated that they were at capacity, and although they were in the process of commissioning another line, they would not be able to ramp up production until late 2023 so were excluded. 

Gaffney Tech also indicated they were at capacity and would not be able to be included at this point. 

Gunther Data Capture said they were interested in our requirements; they had the best product on the market, but would only be prepared to disclose prices if Alset committed to dealing with them from this point forward
exclusively. 

Given the ranking of the engineering tests and the risk this posed in term of not understanding other suppliers capabilities, the team rejected this immediately and unanimously. 

 

A concern that some of the suppliers may have not had a focus on this was raised by one of the team members given Crypto replied in two days and Lexi Logic replied on the day of closing the tender process. The team were particularly excited about the low prices indicated by the China, Japan and Korean suppliers, with some team members stating that we should not progress with the Australian or New Zealand suppliers at all. There was heated discussion about the costs and benefits of including all five suppliers on the Request for Tender moving forward but it was ultimately decided that the costs of additional analysis and time spent on progressing the RFT process with five suppliers rather than three was worth the effort.
 

QUESTION:

Market Analysis

 

Using theoretical concepts (Porter's 5 forces), describe the competitive industry (data projector market) of the suppliers mentioned on the case study.  Don't describe Porter's 5 forces in generic term, rather analyze the 5 forces considering the data projectors market in the case study.

Use the relevant purchasing model (Supplier preferencing model) to explain how aligning with suppliers that see Alset as a preferred customer of data projectors is critical for Alset.  Summarise your market intelligence, with specific reference to the suppliers contacted in your selection process (hints: in the last paragraph of the case study).