New Research — Market-Informed Sourcing: A Game-Changer for Procurement

Peter Smith (my UK colleague) doesn't give himself enough credit for his deep knowledge of how procurement technology works. He also fully understands the importance of approaching technology from a pragmatic business perspective first rather than through the geeky lenses that we're sometimes guilty of including in our Spend Matters research from this side of the pond. Peter's latest Spend Matters research paper, Market-Informed Sourcing: A game-changer for Procurement, presents an ideal case for changing procurement's functional approach to negotiation and supplier management by leveraging advanced sourcing technology.

In the paper, Peter argues that "market-Informed sourcing does not replace category management, but it changes the fundamental nature of the strategic sourcing process and requires a different approach process to be adopted by buyers." Further, "market-informed sourcing allows the procuring organisation to open up options to the market, instead of narrowing down the defined requirement, which is the core of traditional category management. That enables the market to reflect back true economic factors in a manner that benefits the buyer."

Summarizing his analysis, Peter offers up three key findings about how market-informed sourcing fits into broader procurement practice:

  1. Market-informed sourcing does not replace category management, but it changes the fundamental nature of the "CatMan"/strategic sourcing process and requires a different process to be adopted by buyers
  2. Market-informed sourcing allows the procuring organisation to open up options to the market, instead of narrowing down options which is the core of traditional "CatMan." That enables the market to reflect back true economic factors in a manner that can benefit the buyer
  3. Market-informed sourcing is the most significant development in core procurement practice since Category Management

What makes market-informed sourcing so different in Peter's view? Such an effort can enable category managers to expand their entire universe of potential buying options, including:

  • The phasing and any seasonality aspects to the requirement
  • The length of contract, including any options for termination or extension
  • The core product or service specification
  • Acceptable options for bundling, volume discounts, or conditionality
  • Insource/outsource options
  • How to define the scope of the category or the tender
  • Whether to consider a prime contractor solution, or multiple suppliers, and how to bundle the total category requirement
  • How many suppliers are required (or commercially ideal)
  • The geographic spread of the requirement and of the market solution

Peter's analysis builds upon other papers we've recently published in the area of strategic sourcing, e-sourcing and sourcing optimization. Whether you're a Brit or a Yank (or from any other geographic corner of the procurement world), check out Peter's research, Market-Informed Sourcing: A game-changer for Procurement, for free today.

Other recent Spend Matters research on the subject can also be downloaded below:

A Foundational Look at the Evolution of Sourcing Technology and Platforms

Advanced Sourcing Technologies and Platforms to Broaden a Portfolio

A Personal Lesson: Reaching the Limits of Reverse Auctions and Strategic Sourcing: When Collaborative and Quantitative Approaches Would Have Delivered More

- Jason Busch

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