In KPMG’s white paper, FUTUREBUY: The Future of Procurement – 25 in 25, the authors offer up a five-step capability maturity model exploring a range of different skill areas that procurement (as a profession and a function) will require in the coming years. One of these is market intelligence & cost modeling. In regards to maturity in this area, KPMG suggests that organizations first start with a “low level of common tools, processes, and methodologies.” As they move to the next level of maturity, companies begin to use “financial information to create high-level product models.”
Stage three is marked by “dedicated cost model and supplier intelligence databases established with MI portals, feeds, and updates.” But it is only at stage four where cost modeling is truly institutionalized as part of an organizational effort with “dedicated cost modeling, MI analyst, and ground level roles established. All major categories have updated MI feeds.” Finally, at the highest levels of maturity, “cost models, market Intelligence, and global event management is leveraged across the business for application in design, production, and marketing decision” in an “optimized” manner.
Here at Spend Matters, we view the use of market intelligence and cost modeling as two historically discrete areas that are finally starting to come together. This is happening as companies embrace solutions such as Sievo (which unfortunately does not yet have a large sales presence in North America) that incorporate cost models down to the SKU level with market intelligence feeds (commodity prices, currency, etc.) to enable companies to track actual and relative performance across categories. Of course discrete should-cost and cost modeling tools aimed at a design engineering environment stand alone, but the concept of a procurement-led effort bringing cost modeling and market intelligence together is a long-time coming!
You can download the full KPMG paper if you’re interested in more on the topic.