Building relationships with stakeholders to a point where procurement is seen as a valuable business partner is a long and arduous road. Even with C-Suite directives, the prospect of change can be an obstacle and changing mind-sets can be challenging.
Fortunately, the use of internal data analytics and external market intelligence (MI) has changed the way businesses work. It’s also influenced how they go after success and ultimately how that success is defined.
For procurement, harnessing MI both internally and externally is a pathway to building stronger internal relations and generating value for other business units – which supports long-term strategic direction and the success of the organisation as a whole.
How MI brings value to internal stakeholders and their business units
Market intelligence provides direct benefits to the procurement function and also creates advantages for the internal customers and business units. The knock-on effect is the overall value it brings to the entire organisation.
Generally speaking, it facilitates valuable interactions with internal stakeholders, which is driven by access to MI for them. That in turn directly affects how those business units respond to queries, challenges and how they deliver projects. It directly impacts the confidence they have in procurement.
By and large, procurement is looking to drive efficiency for its internal clients, while at the same time improving the quality of service they’re able to deliver for their own customers. Valuable market insights provided swiftly improve efficiencies, such as sourcing lead times, reducing them by as much as 70%.
This positions procurement very much as an enabler and goes some way to changing mind-sets and attitudes. Indeed, the ability of procurement to handle an internal request quickly with relevant knowledge also allows for business units to spend more time focusing on the core activities without having to do any of the heavy lifting.
Direct Benefits to Procurement
The introduction of MI to procurement functions supports a number of key activities for that department too, and has some tangible benefits. It not only supports the creation of subject matter experts but also allows procurement teams to gain benchmarks from external sources that aren’t directly from suppliers. As such, the absence of any bias in the marketplace allows them to gain new insights and unique perspectives.
Sourcing third party MI has benefits when it comes to workload too. The volume of sourcing projects, constant deadlines and multitude of categories to manage each month put corporate procurement under a lot of strain. Getting accurate, reliable and timely data from suppliers under those circumstances is a major challenge. As such, compiling enough market intelligence to support decisions or recommendations is extremely difficult.
To that end, having an outsourced third party provider or a number of them, means that procurement can rely on additional credible, factual evidence to support internal recommendations without having to actually spend wasted hours pulling data from hundreds of sources themselves.
The opportunity to add value throughout the procurement process and to business units through MI is undeniable – it is, in fact, often facilitated by those fresh and unique insights. But, it is only useful when the appropriate type of information is applied at each stage of the procurement process.
Knowing what problem you’re trying to solve first or what your main objectives are should help to point you in the right direction. And in gaining an understanding of who those vendors are and what they provide will also help to provide some direction on where to go.
The different types of MI and the importance of delivery
There are three types of market intelligence, all of which should be familiar. You have things like Porter’s Five Forces and Swot Analysis that fall into one category – they take into account things like market structure, consolidation, market share and who those key players are. They’ll also look at external demand drivers such as technology changes, geopolitical events and environmental considerations.
You then have supplier specific information, such as their capabilities, ability to deliver on their promises and their financial health and the associated risks. You also have the cost structure that takes into account the cost it takes to produce a product, the margins on delivering the product or service and their cost model. This provides insight on what you should expect to pay and who will be able to provide the most competitive price point.
These three aspects provide a realistic view of the market, which is crucial if you want to build a procurement strategy. It’s also vital for working collaboratively with your stakeholders and other business units. How you communicate that information has impacts that can be far reaching; you need to make sure that it’s meeting the needs of you as a procurement function and the needs of your internal customers.
One way of looking at it is to ask how quickly your information is being delivered. Does it take hours, days or weeks to arrive? Is it available online or through a portal? How does that influence how quickly your team and your internal customers can use and act on it?
The fundamental question you need to keep in mind is this: do your internal stakeholders gain from your market intelligence? It’s crucial, because for procurement to add value, it has to do a lot of the heavy lifting that allows the other business units to concentrate on core activities. If you’re able to do that, then you will be regarded as a valuable business partner.
