Ch. 6 Sourcing Strategy Flashcards
4 Sourcing Strategies
- ) Business Competitive Advantages
- ) Spend Analysis
- ) Forecast Future Spend
- ) Market Research
Business Competitive Advantage (5)
What makes the firm different and unique in the market
- -Cost (ex: Walmart)
- -Speed
- -Technology
- -Ease of Use
- -Categories (ex: Cost Leadership, Differentiation, Focus)
Spend Analysis
Review of a firm's entire set of purchases Answers questions such as... -What was purchased? -How much was purchased? -What was the rate of purchase? -What was spend? -With whom was it spent?
Forecast Future Spend (4)
Try to determine future requirements
- Economic conditions
- Market Analysis
- Competitors Actions
- Previous years requirements
Market Research (9)
Understand supply markets..."what kind of environment am I in?" Information categories: -Key suppliers -Price data and trends -Environmental issues -Available capacity -Cost data and trends -Regulatory issues -Technology trends -Technical requirements -Other available data
Market Research: Information Sources (12)
- Trade journals
- Snowball sampling
- Suppliers
- Annual reports
- Trade association
- Investment reports
- Internet
- Category managers
- Industry analysts
- Business libraries
- Newspapers
- Other sources
Triangulation
Explore, compare, and contrast data from multiple sources
Porter’s Five Forces Model
- )-Threat of New Entrants
- )-Buyer Bargaining Power
- )-Pressure from Substitutes
- )-Supplier Bargaining Power
- )—> All working towards Market Internal Competition
Other possible forces…
- Globalization
- Digitalization
- Deregulation
- Taxes
Threat of New Entrants (8)
- Access to capital marketers
- Availability of skilled workers
- Access to critical technologies, inputs, or distribution
- Product life cycles
- Brand equity and customer loyalty
- Government deregulation
- Risk of switching
- Economies of scale
Pressure from Substitutes (4)
- Relative performance of substitute products and services
- Relative price of substitutes
- Switching costs
- Buyer propensity to switch
Buyer Bargaining Power (9)
- Buyer concentration
- Buyer volume
- Buyer switching costs
- Price sensitivity
- Product differences
- Brand identity
- Impact on quality or performance
- Buyer profits
- Availability of substitutes
Supplier Bargaining Power (7)
- Price of major inputs
- Ability to pass on prices increases
- Availability of key technologies or other resources
- Threat of forward or backward integration
- Industry capacity utilization
- Supplier concentration
- Importance of volume to supplier
SWOT Analysis
Internal factors -Strengths -----Broad customer base -----Established product range -----Established distribution range -Weaknesses -----Low product innovation -----Traditional unionized business processes -----Low patent protection External factors -Opportunities -----Emergence of other uses and markets -----Emerging overseas markets -----High barriers to entry -Threats -----Emerging overseas suppliers -----New product development costs are high -----Environmental regulations
Portfolio Analysis (4)
- Bottleneck
- Critical
- Routine
- Leverage
Critical Commodity
Strategy:
-Form partnerships with suppliers
Tactics:
-Increase role of selected supplier
Actions plans:
- Heavy negotiation
- Supplier process management
- Prepare contingency plans
- Analysis market/competition
- Use functional specifications
Routine Commodity
Strategy:
-Simplify acquisitions process
Tactics:
- Increase role of systems
- Reduce buying effort
Actions:
- Rationalize supply base
- Automate requisitioning
- Stockless procurement
- Minimize administrative costs
- Little negotiating
Leverage Commodity
Strategy:
-Maximize commercial advantage
Tactics:
- Concentrate business
- Maintain competition
Actions:
- Promote competitive bidding
- Exploit market cycles/trends
- Procurement coordination
- Use industry standards
- Active sourcing
Bottleneck Commidity
Strategy:
-Ensure supply continuity
Tactics:
- Decrease uniqueness of suppliers
- Manage supply
Actions:
- Widen specifications
- Increase competition
- Develop new suppliers
- Medium-term contracts
- Attempt competitive bidding
Goals for Strategic Commodities
- Develop competitive advantage
- Support & leverage the suppliers core competencies
- Develop best-in-class suppliers
- Support the company’s overall strategy
