Home – Step One for Supply Market Intelligence Success: Embracing the Intelligence-Forward Mindset

Step One for Supply Market Intelligence Success: Embracing the Intelligence-Forward Mindset

Posted on 10-24-2017 by Ulyana Androsova

 Written by Jeanette Jones  founder of Cottrill Research

Supply market intelligence (SMI) is increasingly becoming a key strategic component within procurement. The strategic use of intelligence is a way for professionals to approach the many challenges that are faced, whether from other departments in the organization or with internal stakeholders. Procurement literature is filled with great articles about the importance of SMI, how to address the challenges, steps to take for implementation, and best resources to use. But before any initiative begins or for success to be achieved at any level, a fundamental change in mindset about intelligence must occur. This mindset embraces the belief that intelligence, based on knowledge acquired by the use and analysis of accurate data and information, should be at the core of all procurement efforts. When beginning or expanding, think of SMI as intersecting (not running parallel) with procurement initiatives and improving the results associated with each effort (Jones). Consider the following:

 Intelligence Is Central to the Procurement Function

It is impossible for a professional to strategically and successfully source a product, solution, or service, without understanding the market in which the supplier operates and/or competes. Internal stakeholders do not always trust procurement because of their belief that they are the experts in their perspective spend areas. This is true, but procurement is the function most widely charged with successfully sourcing, buying, and managing all spend areas of the organization.

 SMI Will Continue to Grow in Importance Due to Big Data and Analytics

Big data continues to revolutionize processes associated with procurement and supply chain management. In a recent thesis on the unexploited opportunities of big data analytics on SMI, it is emphasized that SMI will benefit in many key areas such as reducing risk-intensive events involving suppliers and markets. Abilities for forecasting global price levels, market trends, supplier quality and delivery performance, and product/service availability will all be advanced (Paajanen).  

 The Value of Supply Market Intelligence

The qualitative value of SMI can be easily identified but the concept of intelligence can be elusive to quantitatively measure. In The Hackett Group’s 2016 Key Issues Study, it is estimated that “for every $1000 invested in market intelligence, over $300,000 in cost savings are made possible through more informed, data driven negotiations and deeper category expertise,” that’s 300xROI (Connaughton). For those organizations able to support Procurement Centers of Excellence, supply market intelligence ranks third out of top five for services enabled (Flores).

 Using Inaccurate Data is an Underlooked and Increasingly Growing Risk

SMI plays a major role in supply risk management, whether it be supplier assessment or identifying and monitoring negative activities or events that affect the supply chain. A new risk, and one that is underlooked, is the risk that decision-making based on false, bad, or unclean data can have on the supply chain. When researching (especially using the open web) for information to help form intelligence for decision-making, the focus has shifted from how to find the information needed to how effectively the searcher can identify and verify that the information to be used is clean and accurate. An increasingly important component of SMI is developing skills to understand, evaluate, and identify the key resources neededand original sources of data for those resourcesto vet for quality and accuracy.

 SMI is Not as Complex as it Seems

An SMI initiative can be started regardless of budget or staff size. An easy first step is to pilot an initiative focused only on one key spend category or market and do an analysis on which resources are available. Resources for information are evaluated in terms of how they meet the department’s specific needs and how they fit within the budget. Selection of resources, using these two criteria is easier than anticipated. This initial step is the most important and will require the biggest investment of time.

 SMI is the Key to Procurement Transformation

Procurement, in its unique role and positioning in the organization, has the opportunity to target efforts that directly contribute to moving the organizations' competitive strategy forward. Procurement has the capability to respond quickly to and push aggressively the intelligence required by organizations that strive to succeed in today’s hyper-competitive environment.

Is there a gap in your supply market intelligence? Find out how data from LexisNexis can help fill those gaps.

Sources:

 Connaughton, Patrick. “Exploring the Business Case for Using COEs to Deliver High-Quality Market Intelligence.” The Hackett Group. November 18, 2016. https://www.linkedin.com/pulse/exploring-business-case-using-coes-deliver-market-patrick-connaughton

 Flores, Melani. “Trends in Procurement and the Excellence Opportunity for CoEs.” Presentation Slides. The Hackett Group. http://thecoeclub.com/presentation/brussels/Hackett-Beroe-CoE-Club-Agility.pdf

 Jones, Jeanette and Kelly Barner. Supply Market Intelligence for Procurement Professionals: Research, Process, and Resources. Plantation, FL: J. Ross Publishing. 2015, 19

 Paajanen, Salla. “Opportunities of Big Data Analytics in Supply Market Intelligence to Reinforce Supply Management.” School of Business and Management, Lappeenranta University of Technology. 2017. https://www.doria.fi/bitstream/handle/10024/135246/Masters_Thesis_Paajanen_Salla.pdf?sequence=2

Your comment has been posted.   Close
Thank you, your comment requires moderation so it may take a while to appear.   Close