Activity 11
Key supplier profile

Overview

The purpose of the key supplier profile is to review each of the main suppliers operating within the supply markets that are aligned with the category. It is a deep analysis of both incumbent and prospective suppliers, and in particular an evaluation of the main players that might impact upon capacity or pricing conditions.

This profile is complementary to the category profile (Activity 9) and is an activity that is commonly undertaken in parallel. Each main supplier is researched in detail so that an understanding of its capabilities and market power can be assessed, which, in turn, should help the category manager to estimate how much leverage the category team may have when developing and implementing the category strategy.

Elements

The key supplier profile is based on a templated methodology that is designed to gather significant information on each main provider. The focus of the analysis concentrates on the following:

Business overview – This section should provide an overview of the supplier and their product/service offerings. It is important to gain an understanding of whether the organisation is achieving growth in sales and profitability, and whether it is maintaining its position within the marketplace. As well as its product/service portfolio and financial structure, other facets that may be investigated include business strategy, marketing plans and environmental policy.
Market positioning – This section outlines a high-level view of the supplier’s standing within the marketplace. Analysis may include market share, key customers, growth, power, dominance and drivers. A more detailed look at the market is carried out separately in the next stage of the category management process.
Capacity – This may relate to manufacturing and production, warehousing, distribution or other resources needed to deliver the goods/services. Over- or undercapacity will have a direct impact upon the ability to deliver the category strategy.
Financials – This section constitutes a brief summary of key financial highlights, including an outline of the income statement and balance sheet, together with any key financial ratios and trends that are of significance.
Costs – It is often difficult to obtain the supplier’s internal costings related to the price of the product. However, depending upon the type and nature of the relationship, it may be that an ‘open-book’ procedure or variations thereof maybe in existence or could be developed, facilitating the sharing of this valuable information. This section acts as a precursor to PPCA (Activity 14).
Performance – This area is frequently compared with business requirements (i.e. RAQSCI). Historical trend data including performance metrics, service levels and scorecards may be collated on incumbent suppliers in order to reveal the supplier’s historic level of commitment and quality of delivery against contract.
Risk profile – A general level of ‘due diligence’ should be undertaken with key outputs highlighted, together with any key risks. Some organisations like to provide a risk rating for each potential supplier in the category, while others will simply list the key risks associated with a supplier. Key risk areas might include finance, compliance, technology, supply chain, processes and resources.
Sustainability – There should be a summary of the supplier’s strategy and contributions towards sustainability, including accreditations, carbon footprint, emissions, waste-reduction initiatives and so on. These should be made relevant to the category and not general in nature.
Relationship – As this is often considered a ‘soft’ area and difficult to quantify, the state of the relationship can be a challenge, albeit valuable, to assess. Much of the information collected is likely to be of a qualitative nature and therefore subjective; however, it can provide a general picture of how the two parties have managed their business relationship to date.
Motivation – These data are generally gathered from the market grapevine (e.g. supplier contacts and trade magazines). It is an attempt to understand the supplier’s motivation for retaining or gaining the buyer’s business, such as spare capacity and brand attractiveness.

So what?

An in-depth study of the main suppliers within a category will support the team in establishing its initial ideas about market structure, levels of competition and the overall category strategy. This in turn will highlight relevant issues that could impinge upon the delivery of a category project. Ideally there should be sufficient number of suppliers to engender competition.

A comprehensive review of the suppliers combined with a thorough study of the supply market will provide a stable foundation for the category strategy to be built. It is complementary to the category profile, and the two together provide a platform from which the category strategy can be developed.

Category management application

Supports the development of the category strategy
Complements the category profile analysis
Provides a foundation for an initial evaluation of the potential supply market
Assists with opportunity/leverage identification

Limitations

As with other profile templates, there is a concern that the research element of the category management process can become a ‘form-filling’ exercise and be resource heavy in terms of the amount of analysis required to complete it. Some organisations believe that the category profile, key supplier profile and supply and value-chain analysis templates overlap each other, and so a ‘lite’ version is sometimes introduced where all three profile documents are combined.

However, critics of this approach argue that this can decrease ‘attention to detail’ and that important relevant factors may be missed as a result. Some category teams can become obsessed with filling in templates rather than focusing on the underlying research analysis required to unlock value in a marketplace.

Template

The following template can be used to gather detailed information on suppliers:

Template 11: Key supplier profile