Brian Doyle’s Post

Category Strategy - Porter’s Model

External analysis of the supplier market: The analysis that looks more closely at the direct procurement market is based on Porter's market forces model. If the 5 Forces Model (as it is also called) is applied in procurement, however, it must be borne in mind that you are the customer of the industry. If you look at a value chain, it reflects the first three market forces: the power of upstream suppliers, the power of suppliers and their competition with each other and the buying power of customers (i.e. our own buying power). Porter also recognises the power that arises through market entry of potential new suppliers and through substitution. As a very simplified form, a list of questions can be used in which the market forces are assessed in three levels - high, medium, low. In addition to the assessment, it is also essential to have facts to back up this assessment. A procurement market analysis is an integral part of a category strategy. However, if you are unable to answer the questions comprehensively, this is a sign that the procurement market is not sufficiently known. If this is the case, then an RFI/RFQ process is the best way to build up this knowledge. For a simple application of a Porter market forces model, it is sufficient to use a table and then make an assessment for the 5 forces and back it up with evidence. In practice, it can happen that further forces act on a procurement market. It is then necessary to expand the model. One possible force could be companies that also require the category to be procured, but also come from a different industry. These companies are called demand competitors. Complementors can represent a further force. These companies may set the framework conditions that apply in a specific procurement market. How well do you know your procurement markets? #purchnet #theCPOcoach

How Purchasing Power Drives an Organization's Bottom Line💼📈 In today's dynamic business landscape, effective purchasing strategies play a crucial role in boosting the bottom line of any organization. 💡 1️⃣ Cost Control & Efficiency: Smart purchasing decisions help reduce operational costs, leading to improved profitability. Negotiating better terms, leveraging bulk purchasing, and managing supplier relationships can significantly lower the cost of goods sold (COGS). 2️⃣ Supplier Relationships & Quality: Establishing strong, collaborative relationships with suppliers ensures the best value for money and quality products. A reliable supply chain reduces risks and ensures consistency in production or service delivery. 3️⃣ Sustainability & Ethical Sourcing: Consumers increasingly favour businesses that prioritize ethical and sustainable sourcing. Organizations that align purchasing with sustainability not only improve their bottom line but also strengthen their brand and customer loyalty. 4️⃣ Data-Driven Decisions: Harnessing data analytics in purchasing can reveal patterns and opportunities for cost savings. Tracking spending trends, supplier performance, and pricing data ensures informed decisions that directly benefit the company's profitability. At the end of the day, every dollar saved in purchasing is a dollar added to the bottom line. It's not just about cutting costs, it's about making strategic decisions that align with the company’s long-term goals and support its mission. How is your purchasing team contributing to your organization's financial health? Mention in comments below👇 #Procurement #BusinessGrowth #StrategicSourcing #SupplyChain #BottomLine

Savings or not two savings? That is the question.   What is considered “a saving” by procurement?   The procurement function generally differentiates between four types of savings categories, as summarized in the graph below by The Hackett Group (revised):   Category #1: purchase price reductions achieved compared to a certain baseline. The baseline price could consist of the price paid in a previous period, or, more likely, a price estimate forecasted by the buying organization.   Category #2: discounts and rebates. These can be received when certain pre-agreed conditions are met, such as reaching volume thresholds or settling invoices within a specific time frame.   Category #3: purchase price reductions achieved compared to a price list. This category may overlap with discounts/rebates and category #4 at times. Savings are reported based on the difference between the supplier's price list and the final negotiated price.   Category #4: lower final negotiated price realized compared to the initial offer received by the supplier. While this category of savings may not result in a cost reduction for the organization, it is still considered a commercial benefit as the buyer has avoided a higher cost for the company.   The chart below distinguishes between top-performing procurement teams in the market (~15% of the total population) and their respective peer groups. It also highlights how a particular savings category is accounted for. What do you think of savings as a sales or procurement professional? ---------------- Let’s build bridges between #procurement and #sales – one brick at a time. 🥇 I train sales and procurement professionals to unleash their customer-centricity mindset.

What are the priorities for procurement in 2024? And how do they compare to the overall business goals?     The Hackett Group surveyed procurement professionals and asked them to select their top 10 priorities for the year (see picture below).   It is no surprise that with inflationary pressures easing and markets turning more in the buyers’ favor, procurement wants to take full advantage of their stronger position. Hence improving costs is top of mind for buyers. “Acting has a strategic” advisor has made its way back to the top 5 after being deprioritized in the aftermath of Covid in 2023 (see 2023 study). Let's compare procurement priorities to what their companies hope to achieve in 2024. The top five business priorities were formulated by company leaders as follows (interviewed by Hackett as part of the same study): ·        Margin improvement or protection ·        Revenue growth ·        Customer-focus improvement ·        Operational agility ·        Product/service innovation Is procurement aligned with their businesses? Are buyers going after the right priorities? What do you think? --------------- Let’s build bridges between #procurement and #sales – one brick at a time. 🥇 I train sales and procurement professionals to unleash their customer-centricity mindset.

Dear Procurement contacts Please consider having a look at the below list of alternative approaches to meeting your company's financial goals before asking us as your supplier for cheaper prices. I hope this meets the expectations of the author of this post, Jens, when he writes: "𝘈𝘴 𝘢 𝘧𝘰𝘳𝘮𝘦𝘳 𝘣𝘶𝘺𝘦𝘳, 𝘐 𝘸𝘰𝘶𝘭𝘥 𝘩𝘢𝘷𝘦 𝘭𝘰𝘷𝘦𝘥 𝘮𝘺 𝘴𝘶𝘱𝘱𝘭𝘪𝘦𝘳𝘴 𝘵𝘰 𝘱𝘳𝘰𝘢𝘤𝘵𝘪𝘷𝘦𝘭𝘺 𝘤𝘰𝘮𝘦 𝘶𝘱 𝘸𝘪𝘵𝘩 𝘴𝘶𝘤𝘩 𝘢 𝘭𝘪𝘴𝘵 𝘰𝘧 𝘪𝘥𝘦𝘢𝘴 𝘵𝘰 𝘴𝘵𝘢𝘳𝘵 𝘢 𝘤𝘰𝘯𝘷𝘦𝘳𝘴𝘢𝘵𝘪𝘰𝘯 𝘸𝘪𝘵𝘩 𝘮𝘦 𝘰𝘯 𝘩𝘰𝘸 𝘸𝘦 𝘤𝘢𝘯 𝘥𝘳𝘪𝘷𝘦 𝘰𝘶𝘵 𝘤𝘰𝘴𝘵𝘴 𝘵𝘰𝘨𝘦𝘵𝘩𝘦𝘳, 𝘢𝘴 𝘱𝘢𝘳𝘵𝘯𝘦𝘳𝘴 𝘪𝘯 𝘵𝘩𝘦 𝘴𝘶𝘱𝘱𝘭𝘺 𝘤𝘩𝘢𝘪𝘯. 𝘛𝘩𝘢𝘵 𝘮𝘪𝘯𝘥𝘴𝘦𝘵 𝘢𝘯𝘥 𝘢𝘵𝘵𝘪𝘵𝘶𝘥𝘦 𝘮𝘢𝘬𝘦 𝘺𝘰𝘶 𝘮𝘺 𝘴𝘶𝘱𝘱𝘭𝘪𝘦𝘳 𝘰𝘧 𝘤𝘩𝘰𝘪𝘤𝘦." Sincerely David 😀 #Procurement #CostReduction #ItsThisTimeOfTheYearAgain

Supply chain management has been the focus of a series of much-publicized news stories recently as various companies have dealt with new realities in the marketplace. Typically, when one of these firms felt the need to make a public apology about supply chain issues, everyone, including the media, jumped on the bandwagon to second-guess their decisions, talk about the attempts to solve the problem, and provide advice on what they should do. Supply chain management is the design, planning, and control of the supply chain "from the initial raw materials to the eventual customers." The entire array of networks and business processes is necessary to create and fill the market demand for the product. While popularly seen as the move of the company to increase its visibility and control its ancillary functions to a much greater degree, others have indicated that in addition to the increased visibility, supply chain management "should also cut costs, maintain quality, and eliminate waste," basically by standardizing business processes and trimming time and paperwork from transactions. If companies are finally paying attention to their suppliers as weaker profit margins force a greater concentration on improving their operations and those of their upstream and downstream partners. A recent B2B Wall Street article noted that: "access to detailed information on production techniques and costs and the ability to integrate disparate business systems has now moved to center stage." Organizations creating efficient supply chains work with their suppliers so that these skills can be employed to the greatest effect and exploit the comparatively large sums of money spent by the organizations themselves on purchasing. Businesses are thus forging closer links with their suppliers, using a mix of incentives to encourage them to invest money and time in joint ventures, systems activity, and people in the same way that their prime contractors, or original equipment manufacturers (OEM), have been investing. And they have every reason to do so. Online supply chain management solutions can cut the cost of doing business in a number of ways. In managing the supply chain more effectively, buying organizations can focus on driving a reduction in margins using their purchasing spend while improving the speed of the firm's response to rapidly changing customer needs -- thus creating room for expansion in new markets. #SupplyChainManagement #BusinessEfficiency #Logistics #B2B #Procurement #OperationsManagement #CostReduction #BusinessProcessOptimization #OEM #DigitalTransformation #MarketExpansion #SupplierManagement

Check out our new blog post on generating cost-savings in your supply chain. If you're looking to capture savings in 2025, now is the time to take action as many cost-savings initiatives take 3-6 months to identify and execute. We have a process for assessing the current state of a supply chain against practices that we know generate savings, determining the amount of money that could realistically be captured, and designing a roadmap of initiatives to drive those savings. You decide what's worth-it to pursue. https://hubs.li/Q02C1hqC0

It is this time of the business cycle again: costs must come down!   If you are a supplier, then I am sure, in one way or another, your customers and their procurement teams will have relayed the above message to you already.     Contacting suppliers and asking for financial support (i.e., money) is only one way to reduce costs in the supply chain though. Gartner has put together a few ideas that companies and procurement teams can consider to reduce costs.   Many of their points are ideas on how to drive efficiencies throughout the supply chain. As a former buyer, I would have loved my suppliers to proactively come up with such a list of ideas to start a conversation with me on how we can drive out costs together, as partners in the supply chain. That mindset and attitude make you my supplier of choice.   Sales managers take a look at the list and reflect on what projects you can propose to your customers and their procurement teams proactively today and before you receive that email to lower your prices.   What are your thoughts on this as buyers or sellers?   Let’s have a conversation and build bridges between procurement and sales.   --------------- I build bridges between #procurement and #sales – one brick at a time. 🥇 I train sales and procurement professionals to unleash their customer-centricity mindset.  

🌟 Price Optimization in Strategic Sourcing: Unlocking Value Beyond Costs 🌟 In the world of strategic sourcing, price optimization is more than just negotiating the lowest price—it's about balancing cost, quality, delivery, and innovation to create long-term value for the organization. 🎯 What is Price Optimization? It’s the art and science of finding the best pricing strategy for goods and services by analyzing multiple factors like market trends, supplier performance, demand forecasting, and total cost of ownership (TCO). 🏹 Key Strategies for Price Optimization: ✅ Market Analysis: Understand market conditions and supplier competitiveness. ✅ Cost Breakdown Analysis: Dive deep into costs—materials, labor, logistics, and more. ✅ Collaborative Sourcing: Work with suppliers to identify mutual cost-saving opportunities. ✅ Dynamic Pricing Models: Leverage tools to adapt pricing to market changes in real-time. ✅ Risk Management: Consider risks like supply disruptions or price volatility to ensure stability. Why It Matters: 🔹 Cost Savings: Reduce procurement costs while maintaining quality. 🔹 Strengthened Supplier Relationships: Build transparent, win-win partnerships. 🔹 Market Competitiveness: Stay ahead by aligning costs with market trends. 🔹 Sustainability Goals: Promote eco-friendly and cost-efficient sourcing. 🗜️ Powerful Tools for Price Optimization: 💡 Advanced analytics for trend prediction. 💡 Reverse auctions for competitive supplier pricing. 💡 Should-cost models to benchmark ideal pricing. Price optimization is not just a function of procurement—it’s a strategic lever that drives value across the supply chain. How does your organization approach price optimization? Let’s share ideas and insights to grow together! #StrategicSourcing #ProcurementExcellence #PriceOptimization #SupplyChainManagement #CostSavings 🤞 💪