Clarify leverage points and opportunities in the market placeVisualize the market place from supplier’s point of viewInfluence suppliers by understanding strengths, weakness and opportunitiesSupport the creation of commodity strategiesHelpful in supplier development, leverage supplier capabilities and long term contract
Kaushik Rana July, 2010 Approach to Analyzing a Supply Market and Adding Value to Customers
Growth and Decline, profitability changes by segment
PESTEL Analysis of Supply Market Political Any geopolitical impacts, history and future, key global geographic centres, what are the currency and duty impacts, are there counter-trade opportunities. Economics How have commodity prices changed in the global market? How are the global economic cycles affecting category prices? Social Any mandate on in-country/local sourcing, creation of local employment opportunities, social responsibility How will technology change and impact costs? Is innovation and technology creating new/better products, new uses etc. Technological Environmental Impact of transportation/energy/raw material cost shocks. Environmental regulations – RoHS, PbFree etc Legal Are there new product and trade regulations – Trade Agreement Act, NAFTA, In-country certification (China, Brazil)
Analysis using Porter’s 5 Forces New Entrant What are the barriers to entry of new suppliers? Can they achieve economies of scale? Supply Market Rivalry Suppliers Buyers Who are the suppliers? What is their size? Breadth of line? Niche focus? Financial strength? Relationship with the company? What are the supplier success factors? Who are the major buyers? By niche and product? For what purpose do they use the product? Relationship with the company? What is the basis of competition – price, quality, speed, value ? • Are suppliers willing to act competitively? What creates that behaviour? Substitutes What substitutes and allied products are there? What is available that the company don’t use and corresponding switching cost?
Value Realization through Supply Market analysis
Reduce the total cost of externally purchased materials and services over time.
Identify global sourcing opportunities – low cost supplier, world class operations, achieve scale
Benchmark supplier information for increased competition and enable re-negotiation with suppliers