By: Sakthi Prasad -- Content Manager
27 June, 2017
In collaboration with Chandrasekar Koneru, Assistant manager – content
Market intelligence enables procurement organizations to play a strategic role and helps them to sustain cost optimization opportunities. However, as per CEB research, only 32 percent of category managers currently maintain comprehensive category intelligence documents.
Besides helping save costs, on-demand intelligence tools would solve five common "Pain Points" encountered by procurement teams.
While there are multiple suppliers in the market, identifying and selecting the right supplier who can fulfill the organizational requirement is time-consuming for procurement professionals. In a survey conducted among 40 ProcureCon Pharma conference attendees, it was revealed that “83 percent of supplier searches take one to six weeks (or more) to identify the right suppliers.”
With on-demand market intelligence tool, choosing the right-fit supplier becomes easier as it is a focused-approach with relevant inputs already in place. For example, procurement decision makers looking for suppliers related to blister packaging can use Beroe LiVE, an on-demand market intelligence platform, to access region-wise supplier details at the click of a button.
Maverick spend is an unplanned or uncontrolled spend, which increases the overall cost of procurement. A department may be prompted to buy materials or services independently, without involving the procurement teams. And such lack of centralized procurement system often leads to this problem.
For a large manufacturing company, maverick buying accounts for 30 to 45 percent of all indirect purchase value. For a smaller company, it may account for more than 80 to 90 percent of indirect purchase value.
Ardent Partners said in a research report that for every dollar that’s spent off-contract, there’s an average loss of between 12 and 18 percent to the enterprise.
A market intelligence platform that provides easy access to vendor details and product/service prices could be handy as the information can be shared internally with business stakeholders in order to avoid maverick orders. Also, use of on-demand market intelligence empowers procurement managers to negotiate with suppliers for better pricing and save costs through consolidated purchases.
Assessing supplier performance is an essential element of procurement operations. More often than not, Key performance indicators (KPIs) and benchmarking data are not commonly available, which makes measuring supplier performance a tough task -- especially in several categories that fall under Indirect spend.
Organizations can benchmark their suppliers against industry peers to identify problem areas by effectively using market intelligence. This helps them to make informed decisions on supporting the suppliers in improving their performance and competitiveness.
Procurement teams also adopt technology-based solutions for performance measurement. It helps them to create as well as track scorecards for an in-depth reporting and analysis of supplier performance. This data coupled with market intelligence can help in effective supplier management.
While generic category intelligence is widely available in the alleyways of the internet, it’s not always easy to locate relevant, reliable and specific intelligence that would fit the buyer’s sourcing context. On-demand market intelligence provides the necessary inputs such as market size, market potential and supplier coverage for businesses looking at market expansion. Since each market varies in terms of demand and supply, procurement teams can adopt market intelligence to make decisions that suits both their global as well as regional operations. For instance, the U.S. and Europe market are matured markets for ATM services, while APAC has the potential for growth as the market is mostly cash-driven and ATM deployments are high. Hence, the procurement strategy for ATMs would, for example, vary across regions.
Procurement teams always run a tight schedule. And amidst the constant factor of time-crunch, gathering intelligence will not be a priority as it is both labor and time-intensive effort. Also, not all organizations have a full-sized market intelligence team to be constantly surveying the markets and suppliers.
Market data is not only collected and analyzed at rapid frequency but also is constantly referenced for predictive analysis. While it’s essential for procurement teams to use real-time flow of insights to shape and inform the entire decision-making process, they may often encounter multiple challenges, including:
There are dedicated service providers with required expertise and well-trained personnel to perform the complex tasks of data-gathering and market analysis. Procurement managers can hire specialists to track global marketplaces for them. Or they can use on-demand intelligence tools that cover most of the frequently requested datapoints. They no longer have to invest their time in gathering intelligence on key markets or categories they are interested in.
Join us on Feb 1; Rethinking Procurement Operating Model to Drive Stakeholder Success