PESTLE Analysis – guest blog

This is a guest post by Terry Whittaker


Are there other tools that can help conduct a similar analysis to PESTLE with greater results?
The short answer is, Yes.

Kraljic, Preferencing, Supplier Risk Assessment, Supply Chain Mapping, we have all of these tools which you can access following the links below.

What PESTLE will give you is a great snapshot of possible external risks to your business in a quick and easy to understand format. 

PESTLE Analysis

The official line would be that it is a diagnostic tool to assess the external environment. This can help make business decisions and develop strategies. PESTLE is an acronym:
  • Political
  • Economic
  • Social
  • Technological
  • Legal
  • Environmental

POLITICAL:
  • Government policies, political stability
    • Are you sourcing from high risk countries, are they governed by a dictatorship?
  • Regulations
  • Trade agreements
    • Look at the current US/China situation, is it a wise decision to look at an alternative country to source products as a backup if the unrest continues? Just look at the Covid experience we are living, it would have been wise for many businesses to have alternative sources in play with separate geographical locations

ECONOMIC:
  • Exchange Rates
    • Should you set pricing for 12 months instead of agreeing to price indices? Should you ask to pay in GBP and not EUR or USD?
  • Inflation
    • On the rise in the countries you purchase from? (Germany for example do seem to look after their populace with fair working wages)
  • Cost of living
    • Will local wages increase in the countries you source from thus increasing your prices and making you less competitive in the current markets you operate in?

SOCIAL
  • Careers – work life balance
    • Can you retain your staff, are there better employers in the area with perks and a better work/life balance?
  • Buying habits
    • Do customers want to reduce the amount of plastic they purchase?
  • Demographics
    • An older population would mean greater demand on health products? Are you still innovative and market leading?

TECHNOLOGICAL
  • Innovation – specs
    • As previous, are you leading, are you collaboratively working with your suppliers to ensure you are on the wave of the next best product or raw material. Are competitors replacing materials with more sustainable materials?
  • Automation – transactional
    • Can you outsource, use AI to automate responses to suppliers and customers? Can you automate monthly PO’s to heavily used raw material suppliers?
  • AI
    • Are you up to date with Purchasing AI? What can you do to improve processes and trace performance? What is put there, do you know?

LEGAL
  • Changes in legislation (Raw materials)
    • E.g. are Chemicals and materials due to be obsolete due to hazardous issues?
  • Are there plans to reduce deliveries of products into the UK due to the nature of the product?
    • Example such as REACH regulations and Conflict minerals are high on business agendas

ENVIRONMENTAL
  • Carbon emissions
    • Reduce plastic consumption, do customers want a more sustainable source of supply?
  • CSR – Corporate Social Responsibility
    • Ensure you are ethically sourcing, audit suppliers, reduce your risk by tracking high risk countries for child and slave labour

Is 1 hour realistic? Yes, if you have your finger on the pulse, How?
  • Google ☺
  • Ask your counterparts, suppliers and contacts you have gained through your career
  • Use Twitter, CIPS and other social platforms to check what is being discussed

Don’t make it too difficult, if you begin to see a pattern of risk, concentrate and mitigate.

YouTube: https://www.youtube.com/channel/UClSXyDB8HV55BB_gPmOn4AQ?view_as=subscriber
Twitter: @UltimatePurch
Toolshop: https://gumroad.com/ultimatepurchasing


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