Supply Chain Market Analysis in Five Steps [Easy Guide]

The world today revolves around the holy unison of data and time, making them incredibly valuable to grow businesses effectively. With that said, businesses are increasingly streamlining the process by building market research capabilities in-house. This gives importance to understanding the stages of the Supply Chain Market Analysis. The gamut of AI is empowering, such that companies can achieve quicker and cost-effective solutions. To give you an example, the retail bigwig Saks Fifth Avenue increased its data collection speed by 75 percent via in-house research. Accordingly, supply chain logistics has become one of the most crucial factors to success and should not be underestimated.

The Call For Supply Chain Market Analysis

Despite the ease of access to data and faster internet, independent or in-house research does require you to forgo the specific experience and expertise of professional firms. Note that when contemplating between outsourcing or do-it-yourself, trade-offs are inevitable. Should you choose to go ahead with in-house analysis, the best way to approach this is by having a structured yet flexible approach. Doing so will provide you with the requisite intelligence without having to break the bank.

The Five Steps to Supply Chain Market Analysis

These five important steps to complete a supply chain analysis can help you maximize profits and productivity at the same time.

Defining the Objectives, Scope, and Commodity Profile

Supply chain management encompasses an extensive range of functions, and it can be extremely daunting to get through the process. A great way of getting around this is to use the Supply Chain Operations Reference (SCOR) model. The SCOR model involves five crucial stages – Plan, Source, Make, Deliver and Return. This model also comes in handy when defining your objectives, scope, and commodity profile. 

supply chain market
Supply Chain Market

Although the primary goal of market analysis varies, the common objective of attaining key insights remains. And invariably so as it helps to drive profound business decisions and uplift the competitive position. Every company is unique and has its peculiarities. The onus lies on the supply chain team to ensure that the business and its stakeholders stand in unison before executing the market analysis plan. 

Another determinant is the scope. The scope requires you to clearly define the breadth and depth of the activity, along with understanding the profile of the commodity in question. 

Understanding the Supply Market and Price Structure of the Commodity

When evaluating the commercial viability of the commodity, make sure to study the pricing structure and market mechanics. These include costs such as material, labor, transportation, overheads, and energy bills. The factors are crucial and help influence the final price. However, apart from these costing aspects, another thing you should look up is Michael E. Porter’s Five Forces framework. This framework embodies the factors: current competitiveness, new entrants (evaluate entry barriers), power of customers, power of suppliers, and substitute products. At the outset, these aspects help gauge the bargaining power of each of these stakeholders in the industry. 

supply chain price analysis
Supply Chain Price Analysis

In addition to these, you should also delve into the seasonality of the commodity during the market analysis. Assess whether the availability is determined by the time of the year. Other factors that merit consideration are whether it is affected by geopolitical events and changes in the law. 

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Conducting In-depth Supplier and Market Analysis

When conducting the in-depth supplier analysis, be attentive towards the power of supplier force within the Five Forces framework. The first plan of action (POA) should be to identify the primary players in the market. Back the analysis with thorough research and due diligence, including the geographic presence and location, customers, and competitive advantage or unique selling propositions. Doing so helps understand the context in which these suppliers operate.

swot analysis
SWOT Analysis

Next up, dig deeper into the financial backgrounds and research any lawsuits or other risky situations. The great news is that there is a framework that can help lighten that bag of bricks; this is the SWOT(strengths, weaknesses, opportunities, threats) analysis. It helps in making easy comparisons among the primary players or suppliers in the market. 

Identifying the Key Market Indicators

The right or appropriate indicators for your commodity can be perplexing to identify. Doing so plays a significant role in formulating the concluding remarks of the research. Also, it helps to shape the business strategy going ahead in the supply chain analysis.

At this point, you might ponder upon the ‘how’ factor. Note that, in context, the right indicators help in understanding the current state of the market. Go a step ahead and track (using extrapolation) it for a while, and these shall become predictors and dictators of the direction the market is likely to take. The categories of indicators to consider are below:

market indicators
Market Indicators
    • Economic – this involves studying pricing trends, inflation, and production rates.
    • Price indices – the category involves Consumer Price Index (CPI), Producer Pricing Index (PPI), and Import/Export Price Index.
    • Employment – this includes unemployment claims, percentage of the workforce that is fully-employed
    • Production – this category involves gross domestic product (GDP), industrial production rates, and capacity utilization rates.

Compiling the Findings and Formulating Final Recommendations of Supply Chain

This final step of the supply chain market analysis also involves the context of your corporate culture. Risk tolerance, for instance, can be a deal-breaker as it can considerably vary from company to company and industry to industry. So make sure to develop and implement the best-suited approach for your company. 

Conclusion

In-house research is challenging. However, independent due diligence helps unfold intricate aspects and nitty-gritty such as risk aversion, company-specific factors, and culture in the context of supply chain management analysis. When outsourced, these finer nuances are unraveled in much more detail. Nonetheless, in-house research can be incredibly fruitful in upscaling business agility or to start a new business even. It can help in handling unexpected situations.

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