Eight Things Procurement Leaders Want When it Comes to Market Intelligence (Part 1)

In the past few months, I've spent quite a bit of time researching how business users -- included but not limited to procurement and supply chain practitioners -- interact with external market information to make better decisions. Recently, many companies have focused much of these efforts on looking at external supply risk information specifically (e.g., third-party credit ratings, risk scores and indicators, etc.). But risk -- and these specific elements of supply risk -- is only one element that procurement organizations are interested in when it comes to external marketing intelligence and information. In this two-part post, I thought I'd share eight specific ideas focused on external market intelligence that I've heard in various interviews and discussions when talking to practitioners and high-level advisers in the sector. Let's begin:

The first wish-list item that seems to be on almost everyone's mind these days when it comes to external intelligence is supply risk information. Many companies I speak to are just getting started collecting external data (or have plans to do so in the near future). Others, who already have gone down this path, would almost universally like to see external supply risk intelligence do a better job than it is currently in a few areas. For one, companies want better global information (especially in the Far East). Second, they want intelligence that provides fewer "false positives" or alerts that end up not being accurate. Third, they want better intelligence on smaller, privately held companies, especially those with <$200 million in revenue.

The second item on many company's external market intelligence wish list is better pricing index information for contracting purposes. We'll be featuring a detailed guest column in this area later this week from an expert at Paladin Associates on the subject, but it suffices to say on a basic level that pricing indices, when used properly, can help companies create better contracts, reduce commodity risk exposure and maintain better supplier relationships. But there are also many challenges with price indexes that companies often site. Perhaps most important is the fact that many commodity prices are different on a regional vs. a national or world basis.

In other words, there is no single published price for linerboard (or steel sheet, copper coil or resin, for that matter). Rather, pricing can vary as much as 30% or more depending on supply, demand and other factors in different geographic markets. Nearly all the companies I speak to that are interested in using price indices for contracting are looking for more specific information to peg underlying contract elements to and many do not know where to go. For more information on this subject, you can also download a Spend Matters Perspective that covers some of the contracting uses of price index information. And no comment on this subject would be complete without a shameless plug for a free global metals pricing index that I'm involved with.

The third item that companies are looking for at the moment is what I'll term general supply markets intelligence and insight. In an upcoming review of the Procurement Intelligence Unit (PIU) -- a group that was recently launched by Mark Perera from Procurement leaders -- we'll examine one approach that a provider is taking to provide this type of supply market intelligence to companies. But in general, organizations are looking to this type of information to better understand category pricing trends, market capacity, geographic opportunities and any type of supply chain risk.

Often times, they're using Indian-based research houses to pull this data on vendors (in many cases sourcing-related firms and solutions providers) to create custom reports. The generally feeling regarding these firms is that you get what you pay for (e.g., don't expect the world for $10-$25 per research hour). However, the more guidance you can provide them, the better the result. Some also use old-school commodity analyst firms specializing in specific category areas, but in most cases, these types of research end up being more producer and finance driven than procurement focused. Clearly, the market is crying out for a new model here. And maybe PIU will be it.

The fourth type of external market intelligence that I see companies looking for today fall into the category of what I'll term general supplier enrichment data. Companies sometimes use this information as part of a spend visibility initiative, but most of the time they still deploy it independently for standalone projects or programs. Under this grouping falls supplier diversity, CSR and related supply market information. As far as I can tell at this stage of my research, there are numerous providers of diversity information (more and more, with little perceived difference in terms of quality), fewer providers of CSR data and almost limited or no providers -- depending on how you define it -- that offer aggregate information on such supplier data as insurance certificates and quality certifications (there are, however, companies that provide this type of service through solutions rather than simply selling content alone). We all know there's lots of providers of basic corporate enrichment data (e.g., parent/child relationships) to turn to in this regard as well (but, once again, with little perceived difference in quality).

Stay tuned for Part 2 of this post later this week.

Jason Busch

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