Procurement specialists are tasked with sourcing direct materials, ensuring that these materials arrive on time and minimizing costs as much as possible. While striving to accomplish these goals regularly, they are faced with ever-changing external factors, such as economic conditions. These directly impact procurement efforts, and they must be carefully and regularly monitored in order to ensure that the best procurement decisions are being made. Procurement market intelligence is an increasingly vital component of corporate purchasing, and today’s companies must invest in this area to promote overall success.
Understanding Procurement Market Intelligence
Before you can comprehensively explore the benefits of procurement market data and analysis, you must understand what it is and how the data intelligence is collected. Procurement market intelligence may be based on manual research, such as through Google searches and other labor-intensive efforts. The intelligence may also be based on third-party services that gather data from multiple sources for analytical purposes. Regardless of the source of the data, there are three primary aspects of procurement market intelligence that must be aligned.
Market Research
The first aspect of reliable market intelligence involves determining what types of data should be collected and how it will be accessed. Additionally, you must determine how the data will be stored and analyzed. While these seem like basic concepts, they lay the foundation for supply market intelligence and deserve ample, focused attention.
Competitive Intelligence
Another important component is competitive intelligence, which relates to gathering and analyzing a multitude of factors that may be value levelers. These may include disruptors, competitive dynamics, and other factors. Data in these areas must be gathered quantitatively.
Supply Markets Analytics
In addition to focusing on these elements, intelligence is also based on supply markets analytics. The procurement specialist must actively gather and analyze accurate data about the company’s specific supply markets. As is the case with other factors feeding into procurement market intelligence, data related to supply markets changes regularly and quickly at times.
The Importance of Procurement Market Intelligence
Given the fact that there are numerous detailed moving parts in procurement analysis that each requires ample attention, a manual data-gathering method may not be effective or feasible in many business environments today. However, regardless of the method used, procurement market intelligence plays numerous vital roles.
Identify the Right Supplier
Approximately 23 percent of businesses surveyed in a 2018 Levvel study indicated that they struggle to find quality suppliers. Adding to the complexity of the situation is the fact that approximately 17 percent of respondents operate in a highly regulated industry that requires special considerations.
The effects of engaging the wrong suppliers can be financially draining. Unfortunately, 30 percent of the respondents indicated that their suppliers had poor or inconsistent performance. Through excellent procurement market intelligence, these issues and concerns may be minimized.
In a recent blog, we discussed the benefits of implementing supplier management, which includes increased efficiency, improved compliance, reduced costs, and improved reliability. Identifying the correct suppliers for your organization and then managing them appropriately will be key to your procurement efforts.
Analyze Spend Data and Trends
The same Levvel study identifies tremendous benefits experienced by businesses that have relied on automated sourcing tools for procurement market intelligence. For example, 23 percent state that the payment management functions were among the most important or beneficial tools in these applications.
According to Deloitte’s Global Chief Procurement Officer Survey, both spend analytics and sourcing are expected to be the two areas in procurement expected to be most impacted by technology over the coming years.
The ability to accurately and quickly analyze spend data and trends alleviates other recognized pain points as well. For example, many procurement specialists have stated off-budget spending and overspending are serious concerns in their organization. We recently discussed the importance of spend analysis within procurement.
Complete Supplier Analysis and Risk Monitoring
The ability to analyze existing supplier relationships and to assess risk factors may also be improved through procurement market intelligence. Our recent blog on supplier compliance discusses the importance of managing and monitoring suppliers once you have considered their capabilities.
Consider that 18 percent of the respondents in the Levvel study indicated that supplier risk assessment was the most essential tool available in automated solutions today, and 31 percent indicated that supplier scoring sat at the top of the list of most significant benefits of automated sourcing tools.
In measurable analytics, automated solutions resulted in a 48 percent increase in vendor performance metrics. There was also a 56 percent increase in overall control and security through automation.
Improve Credibility
According to Levvel’s Guide to Sourcing Automation, approximately 30 to 49 percent of businesses across a wide range of industries require department management approval for requests. Department managers must analyze the requests closely to determine if the cost is justified, to vet the supplier and to make other critical decisions. When the order or request is backed up by solid intelligence data, it gains credibility. More than that, department managers are able to make informed and superior decisions in many cases.
Conclusion
While there are manual methods available for gathering and analyzing procurement market data, the reality is that many businesses across a wide range of industries struggle with common pain points that could be addressed through automated processes. Accurate and timely intelligence has helped many companies to make better decisions regarding new and current suppliers. They have been able to save money, reduce risk and achieve other essential benefits. With this in mind, procurement specialists may need to analyze how they gather and analyze market data in their departments and identify possible areas for improvement.
