Market Informed Sourcing delivers a package of benefits

We’ve done a couple of events with BravoSolution promoting our White Paper on Market Informed Sourcing (MIS).  The concept of Market Informed Sourcing has gone down very well with the senior procurement folk who have attended – I’ve been gratified that no-one has said “load of rubbish”, although there has been good discussion around when and where it is most applicable.

And we’ve never claimed that it is the right solution for every spend category, every time – but we do think it changes the fundamental nature of category management for some categories, and opens up exciting opportunities for value, achieved by allowing the market to tell you how they can best meet their needs. that contrasts with traditional strategic sourcing where we try and research / guess how the market will reply to our pretty closely defined requirements.

At the two events, I’ve been joined as a speaker by Jeff Ryan from the US, BravoSolution’s “most senior authority on collaborative sourcing”.  Jeff is a very experienced practitioner and consultant in the area of very complex sourcing projects, and he’s got more real life experience of what we call MIS than pretty much anyone around. He gave a great example of how it can work in a real-life situation.

The customer in this case was a major consumer goods firm, who went out to the market for a large packaging requirement. And this was a firm that thought they already had pretty good deals in this spend area, with capable category managers and strong suppliers.  But one of the powerful factors with MIS is that it allows the supplier to express conditionality – “if you do this, or give us that bundle of work, or allow this specification, we could do this on price”.

The firm used the MIS (collaborative sourcing) technology and process to approach the market with their requirement, expressed in a broad fashion rather than precise specifications, or detailed delivery schedules. And one supplier came back with a novel conditionality offer. If the buyer would give a guaranteed minimum volume, over several years, with some constraints in other areas, the supplier could offer a price that generated  a significant saving over their already pretty competitive rates.

The provider could, and would, do that because they were prepared to build a new facility, which would also be attractively situated geographically for the buying firm. They had wanted to build this plant for some time, but couldn’t justify it internally – now having this level of guaranteed volume would enable them to do that, and pass on the economies of a new efficient plant to the buyer.

Now you may say, that proposition might have come up anyway in discussions between buyer and supplier. Indeed it might, if the relationship had been open enough for both parties to enter into that sort of dialogue. But it might also have been lost in a conventional tender process that said “we want three suppliers for this product, tell us your price for this much volume over 3 years”.

The MIS approach however meant that there were no barriers in the way of suppliers expressing their preferences and options – with a mutually beneficial outcome for both parties. That’s just one of the examples that show the power of this approach.

So if you haven’t downloaded the MIS paper yet, we’d love you to do so (here) - we believe it is important that procurement people understand the options now available through this process and the enabling technology.

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Voices (2)

  1. marketdojo:

    Interesting. I arrived at this exact scenario a few years ago whilst managing a high value plastic injection moudling tender. Whilst I didn’t call the process “Market Informed Sourcing”, I did use the market to inform my sourcing approach, which I would have thought any sourcing practice would do, unless you go into it with your eyes and ears closed.

    I think a large part of it is down to casting the net wide enough to find the hidden gems of suppliers out in the world. Even with MIS, if you only approached a couple of local suppliers you would be hard pressed to find innovative solutions to your needs. However if you approach a wide market, your chances increase significantly. I think in total I approached 1500 suppliers for that tender over the course of a few weeks.

    Perhaps I have misunderstood MIS but how does it differ from a conventional Request for Proposal process, i.e. “I need a widget broadly this shape and size which somehow does this function for me….”? Or is it a case of doing an RFP for what would conventionally be classed as a defined or mature market?

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