By: Ankur Rishi
S-W-O-T! Yes, you heard us right. The problem with the SWOT (strengths weaknesses, opportunities, threats) concept is that it has been around for nearly six decades and is too commonly referenced in classical management pedagogy. Almost anything we happen to be too familiar with starts to look unremarkable in a while. Very often, for no explicable reason, we start losing respect for it. Notwithstanding humankind’s philosophical predispositions, the fact remains that SWOT analysis or procurement opportunity analysis is still a powerful tool for sourcing organizations keen on discovering the core strengths of their supply networks and tapping precisely into them to ensure leverage over the competition. Time and again, businesses feel the need to hammer out deals with suppliers that will fetch them the best possible prices, lead times, payment terms (e.g., payment in advance, end of month), and product quality. It goes without saying that businesses must always negotiate from a point of strength. Critical data on suppliers, which is not easily obtainable on the public Internet, is the lynchpin of the negotiation process, thus enabling procurement organizations to tilt the balance in their favor, especially where people on the other side of the table are powerful suppliers. This is where a carefully calibrated procurement opportunity analysis proves handy…
Do a detailed SWOT to capitalize on new opportunities in procurement
A supplier SWOT (strengths, weaknesses, opportunities, threats) analysis or procurement opportunity analysis has been around for a very long time and still serves an important purpose. Essentially, the SWOT analysis for procurement department, if carefully administered, will enable chief procurement officers (CPOs) to shine a torch on the internal factors (quality, delivery excellence, breakthrough products and services, and cost) as well as the external elements (chances of growth, revenue, public perception, and risks) bearing down on the vendor under consideration. In the next step, procurement teams can employ the results thereof as a negotiation lever to create value, pare costs, and mitigate risks.
Step up organizational performance
A SWOT analysis template or a procurement opportunity analysis framework is designed to expose areas of opportunity that a business might otherwise lose sight of. As previously mentioned, this kind of audit doesn’t cost a lot. Neither does it demand a great deal of expertise. With a good SWOT analysis for procurement department, a sourcing organization should be able to discover environmental factors, internal and external, that might work to its advantage. At the same time, this exercise allows procurement professionals to achieve a grasp of unfavorable environments and either avoid or work around them. Furthermore, the SWOT analysis for procurement department generates a single version of truth about the core strengths and weaknesses of the sourcing organization in a lucid format that is easily digestible for even entry-levels in procurement. This fosters bottom-up conversations within the procurement function. By factoring in every employee’s view and getting all hands to think in the same fashion, CPOs can enhance organizational performance.
Support procurement success now and in the future
The best part about a procurement SWOT analysis or procurement opportunity analysis that its output is as simple as ABCD. Basically, SWOT is a 4-quadrant “at-a-glance” representation that depicts the strengths, weaknesses, opportunities, and threats on the supply side. Based on this “molecule-level” understanding of the supply chain dynamic, businesses can think through the complexities, analyze the merits and flaws therein with a certain detachment, and develop a course of action grounded in the reality for near-to-long-term success in procurement.
How SpendEdge can help you drive savings in procurement
Do a thorough SWOT analysis for procurement department
Over the past two decades, businesses across industries have worked with specialists at SpendEdge to craft strategies with high precision to help them stand out in the crowd of competitors and make appreciable gains in the market. Among the tools we deploy on behalf of our clients is a custom procurement opportunity analysis framework to compare the client’s sourcing performance vis-à-vis the competition. Our clients vouch for the value derived from the SWOT analysis for procurement department!
Benefit from in-depth procurement intelligence
With deep procurement market insights, our team at SpendEdge assists clients in streamlining their sourcing processes, further enabling timely decision making. Our fact- and math-based approach to procurement opportunity analysis has improved profit margins and reduced operating costs for a majority of our clients. Other measurable benefits derived by our clients include enhanced product quality, competitiveness, and customer experience.
Conduct impactful vendor risk assessments
Various decisions by vendors, such as, say, eliminating products, might amplify downstream through the supply network, resulting in extended lead times and industry-wide material shortages. Our risk analysis experts assist procurement teams in identifying current and future risks around the supply chain with high confidence and accuracy, including various third-party risks. Our intense risk profiling of vendors is designed to screen out vendors with a potential for contractual failures right at the outset.
Read more: Effective Energy Procurement Strategies for Cost and Risk Reduction
Success story: A procurement opportunity analysis helps an American business discover great potential that it thought never existed
Our client is a leading office supplies (e.g., paper, ink, toner, cartridge, furniture) business in North America serving more than half a million customers. The customer base represents a mix of industries like technology, pharma, bookkeeping businesses, as well as janitorial and cleaning services. The company’s revenue stream from online ecommerce and offline direct sales is split in the ratio of nearly 1:6, as in early 2022, the timeline of this case. Our client is in a business in which year-round repeat sales are assured since office supplies get quickly depleted. Many large businesses frequently stock up office stationery to avoid running out of supplies. However, there are a few pain points on the horizon, and the sector needs to plan, lest these issues turn exasperating in the future. Generally speaking, competition is stiff across many categories in the sector and overhead costs (associated with inventory tracking, packaging) are trending upward. Above all, there is growing demand for office supplies made from recycled materials. Customers crave sustainable office stationery for all kinds of reasons: minimizing their carbon footprint, conserving scarce resources, and even burnishing their “green image” further.
Since its inception nearly two decades ago, our client has nurtured a culture that actively soaks in the latest trends. Moving further along this road, the client is now resolved to situate its core business strategies around sustainability and environmentally conscious design. To this end, the business was keen on framing a new sustainability plan capable of living up to the social, economic, and environmental expectations of customers and other stakeholders. In mid-2022, our sourcing experts began to work with the client’s procurement organization almost like its extended sourcing arm. Conducting an in-depth procurement opportunity analysis of the sourcing organization was the major ask, and based on the insights derived from our study, the client looked ahead to profit from emerging business opportunities.
Our sourcing experts have a string of successful studies around procurement opportunity analysis in multiple domains to their credit. With this experience under their belts, our specialists worked with the client teams to pinpoint and, furthermore, tabulate the procurement organization’s strengths and weaknesses. The upshot is that the client’s procurement organization was able to discover their competitive advantages – at last! By the way, it’s hard to see one’s own strengths since we often take them for granted, and the case is no different with organizations either. Now that our study has revealed the potential opportunities in store for the client, procurement teams there are developing business plans for the near-to-long term based on the findings from our study.
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Author’s Details
Ankur Rishi
Vice President, Sourcing and Procurement Intelligence
With more than 12 years of advisory experience, Ankur manages platform content and services within the sourcing and procurement vertical. Over the years, Ankur has provided consulting services to category leaders from chemicals, energy, and packaging industry, on varied topics, such as category strategy, spend analysis, commodity pricing, and clean-sheet analysis.
