Supply Base Analysis

Understanding power, profit and vulnerability within your supply base

Supply base analysis dovetails with the spend analysis and also involves searching for market trends and analysis. In particular, this stage includes reviewing the performance of your suppliers, undertaking supply positioning/portfolio analysis and supplier/customer preferencing. (Supply positioning is a methodology for mapping an organisation’s entire requirement. Customer preferencing is a methodology for mapping how the supply market perceives the business on offer.)

Other analyses at this stage include Pareto analysis demonstrating which 20% of spend represents 80% of value; ABC analysis is a similar tool.

This stage of analysis includes identifying the isolating mechanisms that your suppliers use in order to try to ‘lock in’ your business and protect themselves from you switching to a competitor. If a key supply requirement has been purchased from a supplier with strong isolating mechanisms it may leave you in a weak position for sourcing an alternative solution and strategies should be generated accordingly. It is useful at this stage to identify any aspects of supplier information asymmetry, (either party having more information than the other about a contract/market), which would need to be accounted for when generating strategies.