Strategic Sourcing Training

8/3/2019 Strategic Sourcing Training

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The Value of Supply Strategy


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Fact: Vertical & Horizontal Disconnection of SCM

OrganizationsCustomer

Supplier

SCM Organization Marketing & SalesManufacturing

Disconnection ofInternal BusinessIntelligence

Disconnection ofExternal Market

Intelligence

Loss of Innovation and Efficiency Improvement Possibilities-> Connection of Market Intelligence has to be a Supply Chain Management

Driven Approach: CUSTOMER AND SUPPLIER FACING


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CustomersSuppliers

Suppliers EnvironmentCustomers Environment

PBUs

Companys Environment

Customer andMarket Intelligence

Supplier andMarket Intelligence

Business Intelligence

Supply Chain Intelligence is the convergence of four activities (information gathering,

analysis, dissemination and response) both upstream and downstream in the supply chain.

A GUESSING GAME

Traditional Focus is Here


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SCM Enablers - Data, Information, KnowledgeSCM Processes

Supply Chain Design, Supplier Rel. Mgmt, Perf. Mgmt,Supplier Quality Mgmt, Risk Mgmt, Cont. Improvement

BI/MI Enabling SCM ProcessesGather, Analyze, & Synthesize

Data & Information

Business IntelligenceSpend

Demand

Performance

Finance

Quality

Market IntelligenceMarketsIndustriesGoods & CommoditiesFinanceSuppliersCompetitorsTechnologies

DATA

INFORMATION

KNOWLEDGE


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Business Intelligence Impact

EnhancedNegotiations

RiskManagement

SupplyContinuity

InternalDrivers

CompetitiveAnalysis

Value ChainNews Analysis

Market Drivers

Total Cost ofOwnership

SupplierRelationshipManagement


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Strategic Sourcing ProcessPhase I Phase II Phase III Phase IV Phase V Phase VI Phase VIIBusiness

Plan Process

Plan Data

Acquisition Evaluation

Supplier Selection &

Development Implement

Performance Measurement & Continuous Improvement

Business Case Spend / Gap Team Charter Key stakeholder

Communication

Baseline Segmentation Work Plan Update Charter Communication

Current state Hypothesis Vision Industry Competition

Potential supplier Benchmark

Narrow supplier Begin strategy

formulation Benefits Cost model

Barriers

RFP Negotiation

strategy Selection Corrective

action/ development

Update strategy Implementation

Identify team Coordination Integrate

suppliers Performance

measurement Corrective

actions

Managerelationship& performance

Communicate Cont.

Improvement Follow-up

Approved Charter

Project Progress Report Timeline

Hypothesis Strategy Profile

Updated Profile TAC Benefits/Cost models

Supplier(s) Selected Development /

Implementation Plans

Implementation status Progress Report

Manage supplierrelationship

Communicateperformance to supplierImprovement plans


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Strategic Sourcing follows a rigorous 7-step process;activities in each step are tailored to the nature of the

commodity and the supply marketProfile

SourcingGroup

DevelopSourcingStrategy

GenerateSupplierPortfolio

SelectImplementation

Path

SelectCompetitive

Suppliers

OperationallyIntegrateSuppliers

ContinuousBenchmark

Supply Market1 2 3 4 5 6 7

Understandinternal spend andexternal market

Create Go toMarket approach

Identify potentialsuppliers

Determineexecution strategy

Conductnegotiations &select suppliers

Operationalizesupplieragreements

Operationalizesupplieragreements

Activities

ExampleDeliverables

Identify &understand currentspend/buy

Conduct industryanalysis

Assess currentsourcing practices

Analyze potentialsourcing strategies

Review savingsestimates

Finalize project plan

Identify newsuppliers

Generate potentialsupplier list

Create and issueRFI

Developqualification

criteria Screen suppliers

Select competitiveselection or supplierdevelopment

Determinenegotiationapproaches

Develop RFPexecution strategy

Develop RFPevaluation criteria

Issue RFP Analyze RPF

responses Develop

negotiationstrategy

Conductnegotiations

Recommendsuppliers

Finalize contracts Determine

implementationimplications

Createimplementation plan

Executiveimplementation plan

Develop process tobenchmark supply base

Develop process tomonitor Industryconditions

Internal spendanalysis

Industry overview& marketdynamics

Categorypositioning matrix

Sourcing strategysummary

RFI template Qualification

criteria List of suppliers Short list of RFP

RFP Template RFP plan Auction plan

RFP analysismodel

Negotiationstrategy template

Auction strategy Sourcing

recommendation

Implementationplan

Ongoing categoryreview process

Supplier report card


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Operating Model

Centrally-Led

Product Led

Provide governance, lead developing ofpeople, drive category planning, manage thesupply base and ensure link and leverage

Mission

Execute category plans, conductsourcing transactions, work closely withsuppliers to ensure progress againstdevelopment plan, drive supplier quality,and coordinate / ensure delivery ofpurchased materials on-time, at the rightcost and quality

Business and Product Line Support (TDP, ADP,PDP)Production SupportSupplier Quality (Execution)Category Planning (Product-led)

Key ActivitiesCategory PlanningCost ManagementSupplier Quality and Development (Strategy)Process and SupportIndirect Material and M&E Purchasing

LogisticsPeople Development

Operating Model is being changed to strike the right balance betweenCentrally led and Product led


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Global Enterprise Category Team Operational

Concept

The Commercial and Engineeringteam is responsible for findingInnovation in the supply base thatthe Company can leverage:

Competitive advantage on currentbusiness

Fill technology gaps in currenttechnology portfolio

Provide Innovative Solutions forfuture customer needs

Concise Commercial and TechnicalStrategy for each Category


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Strategy and Execution are Related

Corporate

financialtargets and Presidents

directives

Goals Strategies Plans TacticsObjectives

Company

strategies

Category plans

Sub-CategoryplansSupplier plansPBU-LevelCategory plansSupplierclassification

Sourcing

decisionsCategory teamand PBU-levelagreed uponactions andtimingSuppliermanagement

Targeted

achievementplans(Example: 60%best cost inregion; 70%reduction innumber ofsuppliers, etc.)Sourcingstrategies

Strategy without tactics is the slowest route to victory.

Tactics without strategy is the noise before defeat. - Sun Tzu
http://www.britannica.com/eb/article?eu=72168http://www.britannica.com/eb/article?eu=72168


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2.1/2.2 Create / Refine/ Document Product

Line/PBU Strategies /Material Group Code /Sub-category

2.1/2.2 Create / Refine/ Document ProductLine/PBU Strategies /Material Group Code /Sub-category

2.3 Create /Refine /DocumentSupplierStrategies


Category Plan Development Future State Map

1.1 CompileIndustry /Market Info

1.0 Compile/ Document Data 2.0 Develop Strategies 3.0 Approve Strategies

1.5 CompileCurrentCompany APVData

1.4 CompileSupplier Data

1.7Create /Refine /PublishCompanyCategoryOverview

1.8 GatherKey ProductLine Business& TechnicalInformationvia meeting ordiscussion

3.1 PBU /ECTDocumentedApproval ofSourcingStrategies

2.4 Create /Refine/CorrelateSpecificSourcingStrategies

Q


Reports/showsjournals/internet/interviews/consultants / etc

APV data fromPortfolios

Business info / FTS / quality /technology / Category, MCA &Commercial Assessments /Customer SpecificRequirements

1.6 Create /Refine /PublishIndustryCategoryOverview

Priority matrixdeterminesECT/PBU/PLengagement level

Strategic leverage

Company StakeholdersPBUs (buyer)

Q

1. Leverage considered?2. All inputs (ECT & PL),

including actionitems, available?

1.3 Compile theTotal Cost &CostManagementInformation

1.2 CompileCategoryTechnicalInformation (EyeOf the NeedleProcess)

Formalize input

SharePoint Document Library(documents & Action Items)

Category StrategiesHome Repository

Pipeline

How todocument

approval insystem?

NewInformation

ScheduledReview

Changing

ConditionsAction items / PL info

2.1/2.2 Create / Refine

/ Document ProductLine/PBU / MaterialGroup Code / Sub-category Strategies

Assess (1) strategyalignment across PL& Categories; (2)total cost impact;and (3) leverageopportunities

2.1-2..3 are completed based on specific need or request

QVC gatesneeded?

Metrics How to measureleverage to ensure the

behavior occurs?


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Each Process is Integral to the NextInputs Outputs

Suppliers Capability Demand and Supplytrends

Mapping of Supply Chain Raw Material/conversion

costs

Market Prices Internal Costs

Market Trends

Process

Category Market Analysis

Strategic Cost Modeling

Commodity Price Analysis

Market Index Planning andReports

Individual Supplier Analysis

Market Analysis

Priorities for Strategic Costing

Commodity Should Cost

Relevant Price benchmarks

Performance Analysis

Benchmarks for Planning

Risk Analysis for category Cost Escalations for category Executive Summary


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The main outputs drive category strategies Cost Models Market Analysis

Market Analysis can include:

External Market Conditions/Trends

Supplier Deep Dives

Supplier Financial Health Analysis

Market Prices/Trends Recommendations on suppliers based on our

analyses

Labor Cost Models:

Industry cost models-any occupation &location

Supplier specific cost models

Product Cost Models

High level product cost models

Deep dive product cost models


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Michigan State U. Benchmarking Study: Impact of

Strategic Category Management

Cost savings

5 to 15% price/cost savingsMore uniform prices between regions One company reported 20% to 30% price

differences between locations Another company reported a reduction in the gap of

10%


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Michigan State U. Benchmarking Study: Impact of

Strategic Category Management

Other savings

Reduction of logistics cost from 3% to 2% of cost of sales.Lower operating costs of up to 15%Improved quality typically from 10 to 20% of yieldInventory reduction from 15% to 30%

Improved on time delivery to 20%Reduced lead times by 20%Improved productivity 4 to 20%Improved communication between functionsEnhanced strategic role of procurementDevelopment of a learning organization


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Gathering Data


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Consultants andResearchProviders

IndustryAssociations

Headlines Suppliers

Trade Journals &Periodicals

Company AnnualReports & 10-Ks

Internet PBU leaders,PLPMs,

colleagues

There are many sources of market and supplier

information


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1.0 Compile/Document Data

Typical Data

Industry Category OverviewDescription of the CategoryTotal Market Value

Major ApplicationsProduct SegmentationCost Management Practices

Industry Efforts and InitiativesBreakdown by Major Supplier/ProductIndustry Structure and Global Reach


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Choosing Analysis Tools


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Theorists Approach Linear

CollectData

ConductAnalysis

CreateStrategy


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T e s t H y p o t h e s i s

Best Practices Approach

GatherData

Conduct Analysis

Develop andRefine Strategy

DevelopHypotheses

Engage Resources

T e s t H y

p o t h e s

i s


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Sample Hypotheses

Resin costs should drop as the cost of oildrops.

Our business case for harness providers is

not sustainable.


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Market Analysis Tools

Converting Data into Insight Supplier Analysis SWOT (Strength, Weakness, Opportunity, Threat) Value Chain Risk Analysis Porters Five Forces


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Supplier Analysis Data needed to make the tool work

Company APVCurrent relationshipsKnowledge of industry playersSupplier customer baseAnnual revenue of suppliersCompetitors and competitive position

Where do you get the dataSuppliersInternal CompanyPBU partnersInternetIndustry associationsTrade publicationsConsultants & research providers


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Supplier Analysis

What the tool providesCost structure

Financial statusCustomer satisfaction levelsSupport CapabilitiesRelative strengths and weaknessHow Company fits in their businessHow Company is viewedCore capabilities

Strategy/future directionCultureThe list goes on as the journey proceeds

When do you use itContinuous, on-going process


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SWOT Analysis

Data needed to make the tool workCan provide insight even with limited data (Often a good way to figure out what datayou have and where there are gaps.)

Where do you get the data fromAny of the sources mentioned so farOften a good tool for a dialogue

What the tool providesA quick sketch of where you standA preliminary call to actionQuick picture of circumstances

When to applyAnalysis of individual divisionsAnalysis of individual suppliersMarket situation


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SWOT Analysis

Opportunities Threats

Strengths Weaknesses Broad customer base Established product

range Established

distributionchannels

Emergence of otheruses and marketsfor products

Emerging overseas

markets High barriers toentry

Low productinnovation

Traditional, unionisedbusiness processes

Low patent protection

Emerging overseassuppliers

New productdevelopment

costs are high Environmentalregulations

InternalFactors

ExternalFactors


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Value Chain Analysis Data needed to make the tool work

Steps in the process of creating a productSteps in product sales and/or distributionTechnology involved

Dirt to the suppliers door Where do you get the dataAssociationsInternetIndustry researchEngineering books

What the tool providesUnderstanding of supplier cost structureUnderstanding of how suppliers add valueIdea of where you want to participateBenchmarks for value

Ability to better predict pricingBottle-necks that can constrain availability When to apply

When you think there are steps that can be cutGenerally works best when everyone in your supply base has a similar value chain (e.g.commodities)


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Sample Value Chain Analysis

Source: The Society of the Plastics Industry, Inc. and Management Horizons, A Consulting Division of PricewaterhouseCoopers LLP.

PolymerizationSmall moleculeslinked together

RawMaterialsNatural Gas

PetroleumCoal

RefiningBasiccompoundsextracted andconverted tofeed stocks

PolymersResins(giant

molecules)

Manufacturing(film production)

Feed-stocksMonomers

(smallmolecules)

MaterialSourcing

ResinProduction

FilmExtrusion Conversion

End-User

Distributor

Finished

Product


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Looking further into the value chain and analyzing the market, we canunderstand the high level cost structure and cost drivers

Typical cost drivers are:Raw material availability and costsDegree of product customizationResearch and DevelopmentYieldSupplier high profit marginsComplex distribution networkScale

Supplier sources

components Assembly Storage &distribution Sales

Rawmaterials

Suppliersmanufacturecomponents

100%

10% 20% 15% 10% 15% 30%COST

Suppliers Cost Elements


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Our Challenge Defining Categories

Categories Definitions DrivePrioritiesAvailability of data

Supplier communicationsPBU expectationsValidity of analysesView of current stateView of future possibilities


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Inputs

Supplier analyses

Value chain analysis Industry definitions

Material group codes Stakeholder expectations/standards

PBUEye of the NeedleCost


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Characteristics of Suppliers thatFit within a Market Segment

Similarproductionprocess

Similar supplier

sources

Similar materialcontent/complexity

Similar productspecifications

SimilarTechnology

Similar

Supply chain

SimilarInternalvalue chain

SimilarCustomersand markets

CopyPaperCopyPaper PensPens

OfficeSupplies

OfficeSupplies

Key Question:

At what level do we definethe market?

Where does the team have

maximum bargaining

power?

I n c r e a s

i n g

B a r g a

i n i n g

P o w e r

Look for Patterns

WritingUtensilsWritingUtensilsPaperPaper

LegalPadsLegalPads PencilsPencils


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Risk Analysis

Data needed to make the tool workThe impact of certain products on Company

Major suppliers in the industryTypical failure points

Where do you get the dataPBU

CostEye of the needle teamBuyers

What the tool providesCost/benefit of risk mitigation strategiesCall to action to change the status quo

When to applyYou suspect there are hidden risksStakeholders do not recognize risk


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Common Areas of Risk

Product quality/service Supply continuity Technology dependency

Supplier dependency Currency exchange fluctuation Business cycle Political Geographic Intellectual Property

Plant downtime Yield Regulatory compliance

Health & safety Environmental

Business Risks Operational Risks


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Operational Risk Assessment Example


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Supplier Risk Example

R e v e n u e I m

p a c

t

Risk Probability Index (RPI)

The following slides will showhow the mitigation processworks. Specifically:

Supplier Identification Effects of Mitigation

Reduction in Risk

In the example case, thereare several suppliers in theyellow and red zones.

The example will follow

Alcoa currently in theyellow zone, with mediumRPI and medium revenueimpact.

Risk Distribution Matrix by Supplier


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The Bar Chart reportshows the supplier riskindex rankings withinthe group. The colorcoded zones helpdirect the priorities formitigation activities..

Alcoa is in the yellowzone indicatingmedium or long termmitigation action.


Risk Reduction by Shifting Supply


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Risk Reduction by Shifting Supplyfrom High to Lower Risk Suppliers

Result:Significantly reducing the disruption risk of

$170 million in revenue impact from an RPIof 20.3 to 18.9 (-1.4%).

Action:Shift supply from Alcoa to Alga, Tek, and

AIP Thermoform


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Prev Cur Change Prev Cur Change Prev Cur Change Prev Cur Prev Change

Prent

2382.01 85

1) Low BSC business/Prentrevenue 2) High SRIM%

1) Allocate more resources suchas inventory2) Contigency plan for backup

367.71 367.71 0 14.32 14.32 0.00 1.9 1.9 0 100.02 100.02 16.77% 0.00%

Alcoa

1156.22 36

1) Low BSC business/Alcoarevenue 2) Slow response totechnical problem 3) Highemployee and senior staffturnover rate 4) Low marketbargain power 5) Sole sourcedmaterial 6) Poor quality

Move to Prent, Alga, andComputer Design. 170.29 0 -170.29 20.31 0 -20.31 3.0 0.0 -3 103.75 0.00 17.39% 100.00%

Perfecseal460.34 6

No survey response Get survey response 109.13 109.13 0 38.00 38.00 0.00 4.3 4.3 0 178.32 178.32 29.90% 0.00%

Alga

200.61 9

1) Low BSC business & profit

margin/Alga revenue 2) Noregular information sharing withtier II suppliers 3) High MRR

1) Consolidate other thermoformbusiness to Alga 2) Helpdevelop regular informationsharing system with tier IIsuppliers 3) Quality audit

44.98 130.00 85.02 17.76 17.76 0.00 2.5 2.5 0 19.98 57.73 3.35% -189.02%

TEK165.47 9

1) Low BSC busines/TEKrevenue 2) Cost structure is notshared

1) Consolidate other thermoformbusiness to Alga 2) Negotiatefor cost structure

18.59 77.10 58.51 16.89 16.89 0.00 2.4 2.4 0 7.54 31.25 1.26% -314.74%

AIP

78.99 1

1) Overall interest alignment islow 2) Slow response totechnical problem 3) Lowengineer support 4) Smallemployee size 5) No regular

information sharing with tier IIsuppliers 6) Low marketbar gain power

Consolidated to other vendors 23.25 50.00 26.75 22.07 22.07 0.00 3.0 3.0 0 15.40 33.11 2.58% -115.05%

Risk Factor Change

SRIM SRIM% ChangeRev Impact (MM) Risk Probabil ity Index RPI Risk Index RIRiskZone

Vendors Risk Reason MitigationSpend (K) Part#

Risk Report(Supplier View)

The Risk Report - by Supplier provides a view of the risk indices and progress for eachsupplier in a category . The current status and mitigation actions are input by thecommodity managers to provide detailed metrics and a mitigation report for eachsupplier.

1029.72 1029.71 23.48 21.79 3.0 2.8 -0.25596.48 571.92 4.12%



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Porters Five Forces Model Data needed to make the tool work

Major players in the industryFinancial conditions of the playersThreats to the industry

Where do you get the dataPublicly available financial dataiSupply iAlertIndustry overviewsInvestor industry analysis reports

What the tool provideslong-term picture of the industryBroad perspectiveCompetition for demandWhere do we have leverage

When do you use itStakeholders are overly focused on short-termStakeholders have unrealistic expectations about supplier behaviorPredict degree of supplier flexibility

Understand competitive threats they face and where you can add value


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As a variation of the Porters framework, additional forces are sometimes examined.These are globalization, digitization, and de-regulation.

Source: Competitive Strategy , Michael E.Porter, 1980

Market Internal

Competition

Pressure fromSubstitutes

Buyer BargainingPower

Threat of NewEntrants

SupplierBargaining

Power

Porters Five Forces Analysis


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Implications: Suppliers may not offer better pricing if they are captive to their suppliers or are squeezed by their position in the value chain and there may be an opportunity to buy at a different point in the value chain.

Porters Five Forces Supplier Bargaining Power

Factors Influencing Suppliers

Bargaining Power Prices of major inputs Ability to pass on price increases Availability of key technologies or other resources

Threat of forward or backward integration Industry capacity utilization Supplier concentration Importance of volume to supplier


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Criticality to Buyers

The concentration of purchase volumes in a

market defines the relative strength andnegotiating power of the buyers.

The buyers ability to influence the market demandis directly proportional to their ability to influencesuppliers behaviors.

The more critical the item being purchased, thelower the buyers negotiating power


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Criticality to Buyers

Characteristics of Critical Items Characteristics of Non-Critical Items

Product is in short supply Product is purchased in large volumecompared to other customers

Clients purchasing volume is smallrelative to most other customers

Product is undifferentiated

Product is a large portion of theoverall cost

Backward integration is possible

Strong

$Strong

$

Weak$

Weak$

A few buyers purchase most of suppliers output.

Suppliers have many buyers to choose from.

Factors Influencing the BuyersBargaining Power

Buyer concentrationBuyer volume

Buyer switching costsPrice sensitivityProduct differencesBrand identityImpact on quality or performanceBuyer profitsAvailability of substitutes


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Capital markets Availability of skilled workers

Access to critical technologies, inputs or distribution Product life cycles Brand equity/customer loyalty Government deregulation

Risk of switching Economies of scale

Factors Influencing the Threatof New Entrants

Porters Five Forces Threat of New Entrants

Implications: Suppliers may be eager to offer improved terms

to keep new companies from entering the market and new market entrants may offer improved terms to gain a foothold.


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Porters Five Forces Threat of Substitutes

The threat or availability of alternate products in a

market also affects the relative strength andinfluence the buyer can exert.

Possibility of a switch to a substitute increasesoptions and leverage


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Porters Five Forces Threat of Substitutes

Original

Product/Service

Substitute

Product/Service

Paper grocery sacksAirline travelPrinted formsSteel pipeElectricityGrocery stores

Plastic grocery sacksVideo conferencingElectronic formsPVC pipeCo-generated powerInternet

EXAMPLE

relative performance of substitutesrelative price of substitutesswitching costs

buyer propensity to substitute

Factors Influencing the Threatof Substitutes


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Internal Competition

Higher levels of internal competition increase

buyer options and supplier flexibility.

Speed of industry growthCapacity utilizationExit barriersProduct differencesSwitching costsDiversity of competitors

Factors Influencing the MarketInternal Competition


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Internal Competition

NegotiatingStrength

NumerousCompetitors

High Fixed Costs

High ExitBarriers

Excess Capacity

PerishableProducts Suppliers may be eager to offer

improved terms not to lose theirvolume and revenue to their

competition


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L H

H L

L H

H L

H L

Market Competition

Entry Barriers

Threat of Substitutes

Impact of Inputs

Criticality to Customers

Suppliers Hold theBalance of Power Buyers Hold theBalance of Power

Sourcing Implication

Balance of Power as Input to Supply Strategy

Source: Competitive Strategy, Michael E. Porter, 1980


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Supplier

Analysis

SWOT PortersFive-ForcesS W

O T

Summarizing the Market Analysis

A Compelling StoryBasis for Strategy

ValueChain

Risk Analysis


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Preparing Documentation


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Company Templates

Value of documentationEstablish base linesEasy referenceBasis for dialogues

Value of standardizationEase of interpretationEase of consolidation and trend spotting

Dangers of standardizationBecomes roteMay not tell the story you need told

Category Name Overview

Category Name Overview

CDApproved and Agreed By


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Industry BackgroundIndustry Background Industry BreakdownIndustry Breakdown

Category Description:

Describe this category and the important characteristics.

Total Market Value:

Estimate what is the total market value of this category globally.

Major Applications:

Identify the major applications in/of this category.

Product Segmentation:

What is the product segmenting within this category ? (i.e. Commodity,Niche, Near Core, Core)

Cost management practices:

Indicate if there is a common cost management practice or methodologyused in the industry.

g yOwner: Global Enterprise Category Team Manager NameOwner: Global Enterprise Category Team Manager Name

Seg 2,$118 ,22%

Others,$20 , 4%Seg 5,

$70 , 13%

Seg 4,$43 , 8%

Seg 3,$26 , 5%

Seg 1,$254 ,48%

Breakdown by Market SegmentBreakdown by Market Segment

For graphs above: Identify and size the major market segments in this category (e.g., Automotive,Medical, Consumer, Electrical, Industrial etc.). Identify and describe the major suppliers in this categoryand their share of the market.

Additional Comments Relative To Major Market Segments / Suppliers

SupplierB, $118 ,

22%

Others,$20 , 4%

SupplierE, $70 ,

13%

SupplierD, $43 ,

8%

SupplierC, $26 ,

5%

SupplierA, $254 ,

48%

Next review: 08/2006

08/2007

Approval: Date of...


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Barriers to EntryBarriers to Entry

Industry Structure and Global ReachIndustry Structure and Global Reach

How easy it is for suppliersto drive up prices?

How many supplier choicesdo you have? The fewer thesupplier

Supplier PowerSupplier Power

How easy it is for buyers todrive prices down?

How important is eachindividual buyer to yourbusiness? How expensive is itfor them to switch from yourproducts and services tothose of someone else?

Are buyers often able todictate terms to you?

Buyer PowerBuyer Power

What is important here is thenumber and capability of yourcompetitors ?

Will your suppliers andbuyers go elsewhere if theydont get a good deal fromyou?

CompetitiveRivalry / Intensity

of Competition

CompetitiveRivalry / Intensity

of Competition

How easy is it to substitutewhat you provide?

Threat ofSubstitution

Threat ofSubstitution

Are there economies ofscale?

Are the costs high orlow of entry?

What is the ease ofaccess to distributionchannels?

Are there costadvantages not relatedto the size of thecompany

Will competitorsretaliate?

What can be theimpact of governmentaction (effect oflegislation)?

How important isdifferentiation?


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Manufacturing

List the manufacturing trends in terms of global

sourcing and BCC sourcing

Globalization/Footprint

Note the global trends and how they may affectBCC sourcing

Legislation

Provide details around any specific legislation inany part of the world impacting the buy and howdoes it impact the category in general.

Cost Drivers

Ascertain how costs of related commodities (input)affect the category. What are the cost drivers?

Other

Market Trends (consumer,supplier, regulatory)

Market Trends (consumer,supplier, regulatory)

Market, Technology, and Competitive TrendsMarket, Technology, and Competitive Trends

New Technologies

List any new technologies that are impacting this

category.

Substitutions

List the technologies that will be phased out in thenear term and what are the new technologies thatwill replace these existing products.

Technology Trends and RoadMap

Technology Trends and RoadMap Global Factors

Global Factors

Significant Global Factors:

Identify and list the major global factors (for

example political, geographical, technological,meteorological and any other factors) that affectthe category and note how they impact thiscategory.


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Provide comments / suggestions.

List major issues or directions

Category Team Leader CommentsCategory Team Leader Comments

Documents

Strategic Sourcing Training