Why Your Procurement Teams Need Supply Market Intelligence

By Hugo Britt | September 28, 2021

Without supply market intelligence, category managers are flying blind. In this article we discuss the benefits of market intelligence and why it’s a key component of best-practice category management.

What is supply market intelligence?

Supply market intelligence means gathering and analyzing data to support the management of specific categories. With market intelligence, procurement is in a better position to manage risks, negotiate with suppliers, ensure customers are satisfied, find cost savings, and gain a competitive advantage.

Supply market intelligence helps category managers understand the following:

  • The supplier landscape: Who are the key suppliers in your category, where are they located, and how do they rate? 
  • Market trends: What is the average price/cost for the product or service in your area? Are your suppliers offering prices above or below average? Commodity pricing must be watched particularly closely. 
  • Demand and supply: When are you likely to experience rises or falls in demand? Are supplies likely to become limited in the future, and what will global capacity do to prices and availability? 
  • Government and regulatory changes: What are the upcoming regulatory impacts on your supply chain and how will it impact procurement? 
  • Benchmarks: Are you receiving good value from suppliers compared with industry benchmarks? This could include benchmarking price, DIFOT, quality, and more. 
  • Negotiation levers: Is there information you could use in negotiations to leverage a better deal with suppliers? For example, suppliers may be willing to lower prices in response to new competition. 
  • Data to support better decision-making: Operational decisions, budgeting, financial targets, and technology investments must be supported by SMI.

How is market intelligence gathered?

Supply market intelligence can be gathered internally through conversations with suppliers, review of supplier material (such as annual reports), and desktop research such as newsfeeds, Google alerts, trade publications, analyst reports, and even social media.

Desktop research

Desktop research is by far the most popular method of gathering market intelligence, especially when only one or two people are looking after categories. There’s an enormous amount of free information out there such as supplier websites, annual reports, trade publications, and analyst reports. Market research companies often publish free summaries or overviews, with deeper insights available for a price.

Unfortunately, there’s no competitive advantage to be gained through desktop research because a category manager in a competing company could be looking at the very same information. Finding an answer to a specific question could also be hit-and-miss. Desktop research should therefore be seen as a starting point for gathering market intelligence.

Source intelligence from suppliers

Suppliers do not only provide goods and services; they’re also one of your richest sources of market intelligence. They live and breathe in the category space, and draw information from their own networks of suppliers and customers. It’s therefore likely that the first place you’ll hear of an anticipated disruption to the supply chain will be from suppliers with their ears to the ground.

One of the advantages of this source of intelligence is that your organization will have a unique supplier ecosystem and could potentially access information your competitors do not have. Unlike desktop research, suppliers can be helpful in answering a specific question about your category.

Keep in mind that a supplier’s information may be biased (such as exaggerating the demand for their product). Source information from multiple suppliers rather than a trusted few, and check against other sources of intelligence.

Internal Market Research Teams

Some of the largest organizations have the luxury of internal intelligence teams consisting of data scientists that can find the answer to specific questions for category managers.

If you do not have the resources or time to gather SMI internally, there are plenty of external providers available who offer generic market research services or custom intelligence.

Artificial Intelligence (AI)

Cognitive procurement AI such as IBM Watson can do the job of a desktop researcher, but exponentially faster and more thoroughly. AI can scan thousands of sources ranging from analysts’ reports to social media in an instant, and can be trained to raise red flags when it recognizes the likelihood of a disruptive event taking place, or can alert users to the best time to purchase a product. It’s no wonder cognitive procurement AI is often marketed as being akin to seeing into the future.

The risks of not gathering supply market intelligence

To demonstrate the importance of gathering market intelligence, consider the risks involved in flying blind or attempting to run a category without any knowledge of the broader picture.

Suppliers could take advantage of your ignorance by raising prices well above industry averages and assuring you that these are standard. A lack of SMI will mean you will have to take the word of suppliers who may be motivated by profit.

You will take longer to find alternative suppliers if you do not have up-to-date knowledge of the supplier landscape.

You may be taken by surprise by supply shortages that you should have known were coming. For example, tech companies who were well-aware of the current semiconductor shortage will have planned ahead and found alternatives to avoid disruption.

You are blindsided by a supplier bankruptcy that you could have foreseen had you been monitoring data such as the supplier’s financial challenges and credit risk.

You are consistently slower to react to supply chain disruptions than your competitors, who access real-time SMI for early warnings.

Where to begin

If you have the capacity to build an internal SMI team, this capability is usually located within a procurement center of excellence (CoE). A Supply Chain Management Review study found that most companies dedicate between one and four employees as part of the market intelligence team.

The same study found that 65% of companies invest in using some form of external resources for SMI. Some of the biggest players in procurement market intelligence are Beroe, SpendEdge, and GEP.

For small procurement teams (which can sometimes be only one person), the only viable option for gathering category intelligence is to outsource the task to a third-party service provider. This can involve subscribing to a syndicated intelligence provider (for broad reports), or a custom intelligence provider that can find the answer to specific questions on your behalf. Cognitive procurement AI providers may also act as a custom intelligence service.

Another option is to outsource your management of a category – including market intelligence research – to a group purchasing organization. A GPO can save you weeks of effort by leveraging its own intelligence sources to gather all the data needed to make an educated decision on the best suppliers. GPOs like Una do all the heavy lifting, which means all you have to do is start saving with the confidence that your GPO’s suppliers have been chosen based on best-practice market research.

Save yourself a headache when it comes to category intelligence. Get in touch with Una today!


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