Supply Market Analysis Tools
Data collection is merely the initial step for research and analysis of job. To effectively represent and communicate the market conditions, the Procurement function may employ some varied data analysis tools to portray and elaborate the current situation and potential suppliers. Some tools used for doing this are discussed below:
a) Porter’s ‘Five Forces’
Porter’s ‘Five Forces,’ were created to describe competitive forces in a market economy. The ‘Five Forces’ are the forces that shape an industry and include Competitive rivalry, bargaining power of suppliers, Bargaining power of customers, Threat of new entrants and Threat of substitute products or services.
Data for the creation of a ‘Five Forces’ analysis calls for a review of all the gathered data from the numerous resources. It may also be critical to have the involvement of deep market intelligence using focused discussions with primary stakeholders as well as subject matter experts. The tool aids in the prediction of vendors and consumer behavior in the marketplace and is a crucial element in the shaping of
supply tactics. It is also a helpful educational tool to lead stakeholders to understand current supply market conditions.
b) SWOT analysis
This is an evaluation used in the examination of strengths, weaknesses, opportunities, and threats (SWOT) could bring insight even with limited data into a supply market or a potential supplier. As a strategic planning tool, the goal is to minimize weakness and threats and exploits strengths and opportunities.
c) Supplier analysis
1. Establishment of benchmarks through industry databases — Benchmarking requires identifying the critical performance criteria that are being benchmarked and in relative competitive performance. Industry benchmarks encompassed comparisons of performance with companies operating in the same industry, whereas external benchmarks encompass best practices and performance levels attained by entities that are not within the same industry.
2. Requests for information (RFI) — This is a solicitation document that is used by firms in obtaining of general information regarding services, products or vendors and is often used before a particular requisition of an item is issued. The procedure is more often applicable where a large or complex purchasing is being considered, and the potential pool of suppliers need to be pre-qualified with a view to determining if the supplier meets the minimum standards necessary for to successful bidding on the project, and if awarded, be able to undertake the project.
3. Value chain analysis — It is utilized to aid in the identification of the cost savings opportunities that are in existence within the supply chain. The objective is having the ability to understand, identify, as well as exploit cost savings opportunities that may not have been noted by business unit managers or even by vendors in bringing the products and services to the required location. 969777
4. Supplier research — Supplier research is required to identify the specific capabilities, and financial health of key suppliers that are at the supply base or that may not currently be in the supply base.