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Introduction
Market Intelligence: The process of
gathering and analyzing supply market data
to drive better procurement decisions
High-quality market
intelligence is a critical component of a
comprehensive category management process.
The more information sourcing and
procurement professionals have to support
fact-based decisions,the better.
Market intelligence answers
critical questions:
•
What’s driving category pricing?
• Who are a category’s key suppliers?
• How will pricing trend in the next five
years?
• What sourcing strategies should be
considered?
But market intelligence is
more than just having a particular piece of
information at a particular time; it should
be integrated into a sourcing organization’s
Market Intelligence Benefits
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disciplined category management workflow. By
treating market intelligence as a deliberate
process, a sourcing organization can gain a
better understanding of important trends,
thus becoming more proactive.
Effective application of
market intelligence not only improves
supplier relationships, pricing and total
cost of ownership, and budget planning and
forecasting, but also reduces risk and
increases organizational impact due to
improved internal credibility.
Supply Risk Management
Business bankruptcies increased by 54
percent in 2008 versus 2007, according to
The American Bankruptcy Institute (ABI).
This statistic shows that
understanding the financial stability of
suppliers is of utmost importance in today’s
economic environment.
A disciplined approach to
gathering and using market intelligence at
the macro-level, category-level, and
supplier-level can reduce risk by
identifying potential issues early. Common
supply risk dimensions include:
•
Financial Stability
• Supplier Capacity
• Transportation
• Product Quality
• Labor Issues
• Regulatory Changes
• Mergers & Acquisitions
• Weather
• Political
• Supply & Demand
Identifying risks across
these dimensions allows category managers to
mitigate the overall risk with strategies
such as re-sourcing, dual sourcing, joint
process improvement, and production facility
relocation.
Cost Reductions
Market intelligence enables category
managers to implement fact-based negotiation
tactics. Multiple factors impact costs and
should be monitored throughout a contract
term.
Important negotiation
drivers include:
•
Market Share
• Cost Structure
• Key Cost Drivers
• Supply & Demand
• Capacity
Just one of these indicators
– cost structure – can be broken down into
several variables for which market
intelligence should be gathered. For
example, knowing the cost structure and
associated cost-factor pricing for a
category allows category managers to
identify cost reduction opportunities and
protects them from supplier price increase
requests.
Cost
Drivers & Cost Savings Opportunity
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Budget Forecasting
Accurate forecasts and budgets are driven by
solid data and thorough analysis.
Third-party forecasts can be integrated with
internal forecasting processes to strengthen
budget accuracy, which is critical when the
economy is struggling and commodity markets
are volatile.
While budget forecasting is
important, price trends for strategic
categories must be tracked on an ongoing
basis in order to predict and explain
potential budget variances. Sources for
monitoring price trends include:
•
Benchmarking Studies
• Government Data
– Producer Price Index (PPI)
– Current Employment Statistics (CES)
• Commodity Price Indices
Credibility
When integrated into an organization’s
workflow, market intelligence increases
category knowledge for existing and new
sourcing categories. By using current facts
and figures to strengthen discussion points,
category managers become more proactive
players and problem solvers within their
companies.
More effective communication
across an organization gives internal
stakeholders (IT, HR, etc.) greater
confidence in the procurement division. This
confidence helps build business, and as
procurement penetrates more spend areas,
procurement professionals expand their
impact on the organization.
Conclusion
Market intelligence is at the center of a
sourcing organization’s supply risk
management, cost reduction, budget
forecasting and credibility. Integrating
market intelligence into a category
management process enables proactive
category management.
Denali Intelligence helps
leading companies fully leverage market
intelligence in order to create
comprehensive market intelligence programs
based on industry best practices.
Learn more about Denali Intelligence via
our exclusive partnership with Corporate
United. Three comprehensive,
category-specific market intelligence
reports are now available to Corporate
United members on the
Market Intelligence
Reports page of the Member Resources
section.
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