Commodity Study Guidelines Summary: The Commodity Study will serve as a comprehensive data source for which you will use to develop your Global Sourcing Strategy. It should consider the below listed elements as well as other items that might be critical based on the specific commodity. 1. Current and future status. Include a description of the commodity, its current usage and forecast of future requirements, suppliers, price, terms, annual expenditures, mode of transportation and storage considerations. 2. Production process. Include how the item is made or grown, the materials or process used, the supply/price status of the materials required, the labor required, the current and future labor situation, alternative produce processes and the possibility of making the item (make vs buy) including costs, time factor, and production problems or risks. 3. Uses of the item. Include primary use(s), secondary use(s), possible substitutes, and the economics of substitution. 4. Demand. Include current and future projected requirements, inventory status, sources of forecast information and lead times, and competing demand – current and projected – by industry, by end product use and by individual companies. 5. Supply. Include current producers – location, reliability, quality, labor situation, capacity, distribution channels, and strengths and weaknesses of each supplier (SWAT Analysis); total aggregate supply situation, current and projected; and external factors – import issues, governmental regulations, technological change forecast, and political and ecological trends/problems. 6. Price. Includes economic structure of producing industry, price history and future forecast, factors determining price, cost to produce and deliver, tariff and import regulations, effects of quality and business cycle changes on price, estimated profit margins of each supplier, price objectives of suppliers, potential rock- bottom price, and price variance among user industries. Consider factors that could impact price such as supply & demand or industry consolidation. 7. Strategy. A high level general strategy on key considerations in sourcing this specific commodity should be included. Primarily cost reductions/management efforts and continuity of supply techniques. Other strategies can be included that address areas of risk uncovered in the commodity study. Make Vs Buy, Outsourcing, Off Shoring can all be items to consider in your strategy section. 8. Appendix. Include general information such as specifications, quality requirements and methods, freight rates and transportation costs, storage and handling, raw materials reserves and statistics, for example, price, production and purchasing trends. Please note that all data in the appendix should support statements in the body of the commodity study and be referenced as such. Supporting charts, graphs and diagrams which are referenced back to the original source data.
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