1-8.3 Example of Relevant Cost Component Areas Analysis

Lowering the purchase cost can be achieved by performing a market analysis. The analysis helps to illustrate:

• Trends.
• Competitive frameworks.
• Substitutes.
• Possible suppliers.
• Strategies for success.

A relevant cost component areas analysis can include:

• Market cycle studies and/or business cycles studies.
• ESI.
• Products or services examination from multiple perspectives.
• Porter’s 5 Forces.
• Strengths, weaknesses, opportunities, and threats (SWOT) analysis.

Additional information on conducting ESI can be found in Section 1-6, Involve Suppliers Early.