Explanation of Base Case and its Tables

Volatility and Sales GrowthBase Case

Beginning of Period
Customers in Market	Amt Purch from all Suppliers	Primary Supplier	Primary Supplier % of Cust Purch	Units of Sale by Primary Supp	Secondary Supplier	Secondary Supp % of Cust Purch	Units of Sale by Secondary Supp
Customer A	1500	Supplier 1	60%	900	Supplier 2	40%	600
Customer B	1200	Supplier 1	80%	960	Supplier 2	20%	240
Customer C	1000	Supplier 2	50%	500	Supplier 3	50%	500
Customer D	0	None	0%	0	None	0%	0
Total	3700			2360			1340
Suppliers in Market	Amount Sold	% Total Market Share
Supplier 1	1860	50.3%
Supplier 2	1340	36.2%
Supplier 3	500	13.5%
Total	3700	100.0%
End of Period
Customers in Market	Amt Purch from all Suppliers	Primary Supplier	Primary Supplier % of Cust Purch	Units of Sale by Primary Supp	Secondary Supplier	Secondary Supp % of Cust Purch	Units of Sale by Secondary Supp
Customer A	1500	Supplier 1	60%	900	Supplier 2	40%	600
Customer B	1200	Supplier 1	80%	960	Supplier 2	20%	240
Customer C	1000	Supplier 2	50%	500	Supplier 3	50%	500
Customer D	0	None	0%	0	None	0%	0
Total	3700			2360			1340
Suppliers in Market	Amount Sold	% Total Market Share
Supplier 1	1860	50.3%
Supplier 2	1340	36.2%
Supplier 3	500	13.5%
Total	3700	100.0%
Summary of Changes During Period
Supplier	Change in Unit Sales Volume	% Volume Change from Beginning to End	Net Unit Volatility in Volume Change	Volatility as % of Unit Sales Volume Change	Customer Growth in Volume Change	Customer Growth as % of Unit Sales Volume Change
Supplier 1	0	0%	0	0%	0	0%
Supplier 2	0	0%	0	0%	0	0%
Supplier 3	0	0%	0	0%	0	0%
Total	0	0%	0	0%	0	0%

We will use this hypothetical example, which we call
the Base Case, to illustrate the concepts of Volatility and Sales Growth. The tables above show a Beginning of Period, an End of Period and a Summary of Changes During the Period. The Beginning of Period will remain the same in every example. What will change is the End of Period state.

The first table, the
Beginning of Period, sets up the original market in eight columns. In the Beginning of Period there are three customers in the market, with room to add a fourth customer. These customers are named Customer A, Customer B, and Customer C, with the potential customer being Customer D.

In the Beginning of Period's second column (Amount Purchased from All Suppliers), Customer A purchases 1500 units per year, Customer B 1200, and Customer C 1000. Customer D is not in the market yet, so it purchases nothing. The total purchases for the industry are 3700.

In the third column (Primary Supplier), we note the Primary Supplier to each customer. The suppliers in the market are listed in Column 1, beneath the Customers in the Market. There are three suppliers, named Supplier 1, Supplier 2, and Supplier 3. The Primary Supplier for Customer A is Supplier 1. Supplier 1 supplies 60% of Customer A's requirements, or 900 units as shown in Columns 4 and 5 (Primary Supplier % of Customer Purchases and Units of Sale by Primary Supplier, respectively).

Columns 6 through 8 provide the same information for the Secondary Supplier: i.e., the Secondary Supplier for Company A is Supplier 2, which supplies 40% of the customer's needs and sells 600 units to that customer.

When all of the Beginning of Period purchases are made by each customer, we find that Supplier 1 sells a total of 1860 units. This amount is shown in the lower part of the second column (Amount Sold). Supplier 2 sells 1340 units, and Supplier 3 sells 500 units.

The market share for each supplier appears in the lower part of the third column (Supplier % Share of Total Market). Supplier 1's market share was 50.3%, Supplier 2's was 36.2% and Supplier 3's 13.5%.

The arrangement of the information in the
End of Period is the same as in the Beginning of Period table. The differences between the Beginning of Period and End of Period are the changes in sales volume and allocation of purchase percentages by the customers. These changes result in changes in the sales of the suppliers in the marketplace and in their respective market shares.

The last of the three tables,
Summary of Changes During the Period, summarizes for each supplier and the total market the changes that took place from the Beginning to the End of the Period. The first column (Supplier) lists the suppliers. The second column (Change in Unit Sales Volume) totals the Change in Unit Sales Volume, which is the result of both Sales Growth and Volatility. These are explained further in the next several columns of the table.

The third column (% Volume Change from Beginning to the End of the Period) quantifies the percentage change in unit sales from the Beginning to the End of the Period. The fourth column (Net Unit Volatility in Volume Change) sets out the Net Unit Volatility in Volume Change in Column 2. The fifth column (Volatility as % of Unit Sales Volume Change) converts the unit Volatility in Column 4 into a percentage of the total sales volume change in Column 2. The sixth column (Customer Growth in Volume Change) identifies the customer sales growth part of the total unit sales volume change shown in Column 2. The last column (Customer Growth as % of Unit Sales Volume Change) converts the customer sales growth shown in the sixth column into a percentage of the total change in unit sales volume shown in the second column.