Please enable JavaScript.
Coggle requires JavaScript to display documents.
Course 5: Supply market analysis - Coggle Diagram
Course 5: Supply market analysis
Revisit Porter’s Five Forces to Unleash Procurement Innovation
How Procurement Can Counter Porter’s Five Forces
Countering Threat of New Entrants
Countering Threat of Substitute Products
Countering Bargaining Power of Customers
Countering Rivalry Among Competitors
Countering Bargaining Power of Suppliers
Rivalry Among Competitors
Threat of New Entrants
Reinvesting cost savings into R&D
Moving increasingly into supply-chain financing and investing as a means for tearing down supply-side barriers to entry
Keeping end-market prices low by maintaining competitive cost
Threat of Substitute Products
Analyzing the risks in supply chain of competitors selling substitute products
Understanding the historic trends, volatility patterns and future expectations for costs, profit and other success factors of substitute markets
Spotting potential substitution threats to a company’s own product lines
Bargaining Power of Suppliers
Unbundling and commoditizing of complex goods and services
Pushing suppliers for greater cost-to-price transparency
Increasing the percent of suppliers’ business dependency on your company
Bargaining Power of Buyers
Discovering unique service partnership opportunities in the supply base to enhance overall package
Unique product design through supplier involvement right from the engineering phases
Driving customer loyalty by employing strong governance and ongoing performance management over strategic non-product factors like after-sales support, return goods policies, or grievances redressal
Financial Analysis of Suppliers
Financial statements request
The opinion letter from the CPA.
Balance Sheet
Unaudited interim financial statements
Income statement (P&L)
A fully audited, unqualified financial statement as of the end of the last fiscal year, CPA prepared.
Notes to the financial statement
The external auditor
Provide an external view of the company
They will do enough of an audit of the financial
statements that were prepared by Company management to determine the fairness of the financial statements as accurately representing the company
Provides safeguards that they were done by a professional CPA,
Will provide a report that is fair and consistent
Steps to analyze the financial health of a Supplier
Calculate the 14 business ratios* and compare them against the best in their industry and location.
Do a credit check on the Supplier using a company similar to Dunn & Bradstreet
Get and review the Suppliers financial statements
Financial Analysis
Often used as screening process in initial selection phase
Risks of financially weak supplier
Supplier will go out of business
Insufficient resources to invest in improved plant and equipment
Supplier may become too
financially dependent on buyer
May be indicator of other problems
Interpreting Financial Ratios
Liquidity Ratios
Debt Ratios
Interpretation (compare to industry average)
Interpretation (compare to industry average)
Profitability Ratios
Activity Ratios
PESTLE Analysis
Social factors
Technological factors
Economic factors
Legal factors
Political factors
Environmental factors
Leveraging SWOT Analysis for Procurement Strategies
Leverage your Category / Commodity | Sustainability Team to conduct the following steps:
Step 3: Determine and document your most impactful departmental weaknesses
Step 4: Determine and document your most significant departmental opportunities
Step 2: Determine and document your most significant
departmental strengths
Step 5: Determine and document your most impactful departmental threats
Step 1: Assemble to collaborate with your senior
management team
Procurement Function SWOT Analysis Domains
Opportunities: are external factors that, if leveraged effectively, can be a source of Procurement Function enhancement and competitive advantage
Threats: are external factors that, if they become reality, can constrain the Procurement Function and be a source of brand damage and customer dissatisfaction, requiring intense risk mitigation strategies
Weaknesses: are Procurement Function disadvantages that exist
Strengths: are Procurement Function core competencies or capabilities that are executed well. They can be a source of strategic alignment and competitive advantage
Map your supply chain
Recognise the risks
Build a map
Motivate suppliers
Create visibility
Work collaboratively