Procurement & market analyses matrixes
Nicolas Passaquin
Chief Procurement Officer - Global Head of Sourcing ; Transformation ; Value Creation & Performance optimisation ; Risk & Sustainability
In my previous post, I talked about getting Market Insights. This conversation leads directly to how to analyze data collected to create the right transparency to drive better decisions. One way is to use different analysis matrixes.
What are market analysis matrixes?
Procurement analysis matrices are frameworks or models used to evaluate and analyze various aspects of procurement activities. The purpose of these matrices is to help procurement professionals make informed decisions, prioritize resources, and manage risk. Some commonly used procurement analysis matrices include Porter's Five Forces, SWOT, Kraljic Matrix, Supply Market Analysis, etc…
These analysis matrixes can provide valuable insights into procurement processes and help organize information to drive better decisions that support their overall business objectives.
Why are those structured analyses important?
Analysis matrixes are important because they help procurement professionals:
1. Evaluate Market Dynamics: Matrixes like Porter's Five Forces provide a comprehensive view of the market, which helps make informed decisions about suppliers, products, and pricing.
2. Assess Internal Capabilities: SWOT analysis provides a framework for evaluating an organization's internal strengths and weaknesses, helping prioritize their efforts and identify areas for improvement.
3. Prioritize Procurement Activities: Kraljic Matrix helps prioritize activities based on the importance and risk associated with each category, ensuring that resources are focused on the most critical procurement needs.
4. Minimize Risks: Supply market analysis helps organizations identify risks and opportunities in their supply chain, allowing them to mitigate risks and capitalize on opportunities.
5. Make Cost-Effective Decisions: TCO analysis provides a comprehensive view of the full costs associated with procuring items, enabling us to make cost-effective decisions that support the organization's financial goals.
6. Drive Continuous Improvement: Analysis matrixes help organizations evaluate their processes and outcomes, providing valuable insights into areas for improvement and enabling continuous improvement.
Overall, analysis matrixes provide a structured and systematic approach to evaluating activities, helping organizations make informed decisions, minimize risks, and drive continuous improvement in procurement practices.
How to use each of those matrixes?
I won’t go into a lot of details and, additionally, there are dozens of different models but if we summarize how each “major” one could be used:
1. Porter's Five Forces: To use this matrix, first gather information on the market and its players, evaluate each of the five forces (bargaining power of suppliers, bargaining power of buyers, threat of new entrants, threat of substitutes, and level of rivalry among competitors).
2. SWOT: Start by defining the scope of your analysis (e.g. a specific product, supplier, or market). Then gather data on the internal strengths and weaknesses, and external opportunities and threats, and use this information to identify areas for improvement and prioritize activities.
3. Kraljic Matrix: To use the Kraljic Matrix, categorize procurement “items” into the four categories (Strategic, Leverage, Bottleneck, and Non-Critical). Then prioritize your activities based on the importance and risk associated with each category.
4. Supply Market Analysis: Gather data on the suppliers and markets and then evaluate this information to identify risks and opportunities for cost savings, supplier performance improvement, and other procurement goals.
5. Total Cost of Ownership (TCO): To perform a TCO analysis, gather data on the full costs associated, including the initial purchase price, ongoing costs, and end-of-life costs. Then use this information to define your approach to the market.
Each analysis matrix provides a different perspective, and you should use multiple ones in combination. By using analysis, you can make informed decisions, minimize risks, and drive continuous improvement in procurement practices. The key point here is to structure your thoughts. So, you are putting all the chances to reach the optimal solution
Business Consultant, Coach & Lecturer
2 年Great post, Nicolas and a very good illustration why Procurement should approach its upstream markets no different than Sales is approaching its downstream markets!
"Life isn't about waiting for the storm to pass, it's about learning how to dance in the rain"
2 年One of the best summaries of these tools and their application in procurement that I've come across. Thank you!
Procurement Director | People & Projects | Strategy & Transformation | Processes & Digitization | Capability Development | Category & Supplier Mgmt. | Business Partnering | Change Mgmt.
2 年Nicely said Nicolas Passaquin . Recently we have read that many pros are criticizing those “old good” tools. I am still finding a lot of value as you clearly explained in those tools. You can replace them if you want for more fashion ones (not sure which ones by the way) as much as the analysis is being done. I am with Giuseppe Conti combining Kraljic and Preferencing is a MUST that does not happen too much as we are often too focused on our company. How many times I have seen wrong Porter analysis having proc pros putting their company at the center of the analysis instead of the supply side… a far too frequent mistake still. Category managers are paid to create clear insights from internal and external analysis. I don’t often see that neither.
Professor of Negotiation & Influencing | #1 in Top 30 Global Gurus for Negotiation | Former Procurement Executive
2 年Once again, great content Nicolas! A matrix that I like is the one about Supplier Preferencing, to have a better idea about how the supplier sees you as a customer.