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Welcome to Supply Market Analysis. We have briefly discussed supply market analysis in the Strategic
Sourcing course and we also discussed it in Supplier Management, in particular about how you seek
suppliers. Well, part of that discussion, we highlighted a few of these things, but we're now going to take
a deeper dive into looking at actual supply markets that you would choose suppliers from. So that's
what this particular course is about. As I always do, let me give you my expectations for you. Your
learning objectives for Supply Market Analysis, it's going to be over a three-week period. With this one,
we can go a little deeper than we have in other courses that we've taken in the past. We need you to
learn to understand various tools and techniques to evaluate supply markets. There's three ways we're
going to look at it. In a macro level, we're going to give you a tool called PESTLE. I think you keep seeing
that before in Strategic Sourcing. We're going to talk about some tactical issues where we're just going
to take a look at the industry, things such as supply market segmentation, 5-forces analysis, supply chain
mapping. That also, supply chain mapping will be useful in risk management that we mentioned in the
previous course. Lastly, we'll get down to the operational or supplier level. This is where you're choosing
suppliers. So we're going to go through all three of these, one week each in each one of these segments.
So as I said, this is over a three-week period, macro level, industry level, supplier level. Here's where
we're going to look at it. We're going to start first looking at a macro level, standing back from a very
strategic standpoint is what does the market look like? I'm going to take it a little bit step lower, where
we're going to say, "Okay, we know what the overall market looks like. What about what this industry
that we're going to choose a supplier from?" We call that the tactical level. Then lastly, we're going to go
into a lot of detail into a supplier level we finally pick the suppliers. So this is Week 1. Let's go ahead and
get started. We're going to talk again about PESTLE, I'm going to go through that in a minute. But
basically, it's a strategic tool for trying to understand supply market growth or decline, business position,
potential direction, and what's going on from a very strategic level. You've seen this a little bit before in
Strategic Sourcing, but let's go through it again and we're going to go a little deeper dive this time. So
this is what PESTLE stands for: P is for political, E is for economic, S is for social, T is for technological, L is
for legal, and E is for ethical or environmental. Actually, over the years, they've combined that both for
ethical and environmental. There's a lot of factors we're going to analyze, trying to stand back and look
at a supply market in particular. So let's go through this. So the first one is political, that's the P in
PESTLE. We look at things like government policy, political stability, taxes, supplier regulations, globe
trade agreements, and any other restrictions around it. Economic, we're going to look at things like
exchange rates, globalization, economic growth or decline, inflation, interest rates, cost of living, labor,
and consumer spending habits. Social, next category. We're going to look at consumer trends, fashions,
consumer buying habits, lifestyle factors, career attitudes, work-life balance, and population
demographics. Technology, we're going to take a look at automation, innovation, disruptive
technologies, social networking, upgrades, robotics, artificial intelligence, and security. Legal is the next
one, is there any laws, any common laws, labor laws that might affect the overall strategy, health and
safety regulations. Then the last one is environmental, sometimes they also add ethical in here, but just
as an example, this would be environmental restrictions imposed in-country, sustainable resources,
corporate social responsibility, ethical sourcing, we talked about ethics but this expands a bit broader
term of ethics, transportation, procurement, and supply chain management. So those are the key
categories we're going to go through. I went through them relatively quickly. If you'd like, you can come
back and review this list. Let's take one example. So here's just the first two, political and economic. You
can use these factors that I referenced before to use as a judge. You say, "Well, how might these factors
affect this particular supply market?" Then the last thing, with the circle around it, basically it says
what's the impact on procurement or sourcing, if any, maybe there's none, maybe there's three or four.
But at least, it forces you to go through this from a very strategic level. So I would recommend the way
you approach this is that you can do this with your team. It's better to have a group of people, maybe
your cross-functional team, walk your way through this very strategic tool and try to determine how that
equates to the supply market that you're looking at getting suppliers out of. What are some key
takeaways on this macro/PESTLE analysis? Well, before you start jumping in trying to identify potential
suppliers, I think it's important just to take a step back and say, "What is the overall market look like
from a strategic perspective?" I think it's a pretty easy thing to do. You can use this tool, get a bunch of
people in the room, and I think it gets a very good output in probably an hour or so. Certainly, it might
be a couple of follow-ups, but this is a very simple tool to use. This should provide you with potential
opportunities, potential threats, implications, and particularly if you're going to brand new supply
market area you're not familiar with, this is very critical to your success. So that ends Week 1.