Supply Market Intelligence for Procurement Professionals: Research, Process, and Resources

by Jeanette Jones, Kelly Barner

Overview

This reference provides procurement professionals with the process, practical real-world tactics, and guidance needed to design and develop a supply market intelligence program that will integrate with existing procurement team structures and processes, and deliver significant value to an organization as a whole. The authors clearly explain each of the concepts introduced and then provide the background, steps, and resources required to make their successful execution possible.

Product Details

ISBN-13:	9781604271010
Publisher:	Ross, J. Publishing, Incorporated
Publication date:	11/01/2014
Pages:	360
Product dimensions:	6.00(w) x 9.00(h) x 0.90(d)

About the Author

Jeanette Jones (MLS) has over 20 years experience providing corporate business and strategic sourcing research services and is the founder of Cottrill Research, a provider of supply market intelligence research services. She has established libraries with research functions for Arthur Andersen and the IT Vendor Management Group at Bank One (JP Morgan Chase) and provided research services for the Strategic Sourcing Group at Wachovia. She has served as an adjunct professor at Ohio Dominican University where she taught a Special Libraries class for the Library and Information Sciences Department. She has also taught research and information literacy skills to students at Collin College and College of Southern Nevada and has authored detailed research guides covering the subject areas of business, supply chain management, and hotel/casino management. She currently maintains the Cottrill Research Blog, which provides news and analysis about the latest research and information resource offerings for procurement professionals. Kelly Barner (MLS) is the Managing Editor of Buyers Meeting Point, an online resource for procurement and purchasing professionals, and has over a decade of experience working in procurement and supply chain. Her unique perspective on supply management is based on her time as a practitioner, a consultant at a solution provider, and now as an independent thought leader.Ms. Barner is a popular and regular guest content contributor to publications and blogs such as Procurement Insights, the American Purchasing Society Journal, the eSourcing Forum, and ThomasNet's IMT Procurement Journal. Since 2011 she has delivered a weekly procurement Internet radio update that covers the coming week's events and a guest soundbite with editorial commentary. Ms. Barner has her MBA from Babson College, an MS in Library and Information Science from Simmons College, and a BA in English and History from Clark University. In 2012, 2013 and 2014 she was awarded a Provider Pro to Know designation by Supply & Demand Chain Executive Magazine, and in 2013 she was also recognized as one of 28 Top Female Supply Chain Executives.

Read an Excerpt

CHAPTER 1

OVERVIEW OF SUPPLY MARKET INTELLIGENCE

It is important to have an actionable definition of any approach in order for it to be successfully implemented in an organization. Therefore, we start our book with this definition of supply market intelligence:

Supply market intelligence is created when external information is collected and analyzed to form actionable conclusions that affect a company's ability to strategically locate, secure, and manage sources of supply.

This book is for procurement practitioners, who are the front line managers and individual contributors working to improve the use of corporate resources, as well as category managers and Chief Procurement Officers (CPOs). As a result, we will balance the book's focus between execution and management.

In this chapter, we provide a foundational explanation of supply market intelligence by breaking it down into its parts, and then exploring its terms in reverse:

1. Defining intelligence,

2. Considering the evolving nature of markets, and

3. Transitioning to the multiple perspectives on supply management.

Of the three terms, intelligence is the most ambiguous, but definitions of markets and best practices for managing sources of supply are rapidly evolving, as well. Despite the challenges associated with capturing and articulating the relevance of supply, markets, and intelligence in their own right, the ultimate goal is for procurement to create an environment where the three intersect to their full potential.

INTELLIGENCE

As stated above, intelligence is an abstract concept. The term has a different meaning in each situation where it is invoked. In the context of procurement, intelligence is the strategic, context-sensitive interpretation of information relevant to managing contracts, suppliers, and spend categories. Procurement professionals manage both internal and external intelligence in the regular course of their duties. Internal intelligence is based on a combination of historical spend, forward-looking budgets, and corporate strategies for growth, consolidation, and reorganization. External supply market intelligence is driven by information from outside of the organization, deemed relevant based on each company's unique perspective. The input required to create external intelligence comes from sources such as incumbent and prospective suppliers, industry analysts, databases, and news resources. When created effectively and applied appropriately, supply market intelligence represents an undeniable competitive advantage for an organization.

Nothing that creates a measurable advantage is easy to come by, and intelligence is no exception. Although source information is often easily and (over) abundantly available, crafting intelligence requires a sustained investment of time and resources. Intelligence is not big, fast, or loud. It cannot be achieved just by collecting vast amounts of data, nor are its advantages revealed quickly or obviously to the casual observer. Information does not become intelligence until it has been read, qualified, and considered. The process of converting information into intelligence is influenced by a number of inputs, and therefore, is often based on trends rather than data that represents a single point in time. This combination of information filtering and analysis takes skill and effort to complete because it is performed in pursuit of a nuanced idea that has not yet materialized in the minds of the professionals seeking it.

The combination of information and analysis that lead to intelligence are not to be taken for granted. Reliable resources and methods are required to gather the relevant, quality information that ultimately provides the spark that becomes intelligence. Information is a raw material that must be collected and processed. The quality of this raw material and procurement's interpretation of it are just as critical as they would be in any manufacturing or development process. As such, governance standards and processes should be established to ensure that only accurate, verifiable information and objective analysis are incorporated into the intelligence creation process. The pressure to become more strategic may lead procurement teams to turn their backs on tactical efforts, believing that they are less important. A choice does not need to be made between tactical and strategic; effective teams develop a long-term strategy and then outline the short-term, tactical steps required to execute it.

As desirable as intelligence is, it is not knowledge or information, and therefore, cannot be proven accurate in advance of a business decision based on it. There is inherent risk in the process of intelligence creation. There are endless examples of bad intelligence throughout history, many of which proved costly for the people and organizations that acted upon it. For example, in the late 19th century, J. P. Morgan invested heavily in Thomas Edison's direct current (DC) model for electricity. Nikola Tesla, one of Edison's former employees, invented a competing model called alternating current (AC). Morgan was a cautious investor, and he asked Edison if the competitive threat from AC was real. Edison disregarded AC as unsafe and assured Morgan that his own invention would be the prevailing technology. As a result of Edison's assurances, Morgan continued to make sizable investments in DC. Unfortunately for both men, Edison was wrong. In a series of bids where the two technologies competed head to head, including the 1893 World's Fair in Chicago and the 1895 installation of an electric power generating plant at Niagara Falls, AC was selected as the preferred form of electricity, and remains the standard to the present day.

J. P. Morgan received nonobjective, inaccurate intelligence from Edison and acted on it in a series of decisions that cost him in excess of $83 million in today's dollars. The scientific details regarding how the AC and DC systems operated, along with their respective advantages and shortcomings, did not directly motivate Morgan's investments. It was Edison's interpretation of the competitive threat from AC as minimal and fleeting that served as the intelligence behind Morgan's decision to invest. Although Edison was far from objective, his expertise in the emerging technology of electricity qualified him as a source of supply market intelligence. Had there been a less involved third party available to validate the information and Edison's analysis and recommendations, Morgan might have made a different decision.

This historical example demonstrates the difference between information and intelligence. It also serves as a cautionary tale for creators of supply market intelligence and those who rely upon it. As the authors of the Wright Interface Blog summarized, "If J. P. Morgan would have listened more to his father's advice and took [sic] more time to get to know Edison's team at the time, he could have had analysts perform a third-party review that would have saved millions in J. P. Morgan investments and would have resulted in much faster profits for J. P. Morgan." The perspective of the person responsible for performing the research and analysis has a direct impact on the quality of the intelligence created as a result. That person serves an important role with regard to the information that will become intelligence in the form of risks, recommendations, and trends. The professional in this position filters, analyzes, synthesizes, interprets, and defines action items. As shown later in this chapter, the importance of perspective creates an opportunity for procurement to amass supply market intelligence even when there is expertise elsewhere in the company.

Although this reliance on the perspective and capabilities of a person or team leaves the door open to the misinterpretation of information, there are few if any comprehensive, viable alternatives. Intelligence will always involve judgment calls, both in the analysis of information and in the execution of the resulting recommendations. The intelligence creation process cannot be automated using technology because of the subjective understanding required to conduct research and process the results. Professionals conducting research must understand the motivating business conditions, as well as the information being considered and how they intersect, in order to arrive at relevant conclusions on behalf of the organization.

Some research can be outsourced or conducted by a consulting firm or services partner, but having an understanding of the relevant nuances gives an edge to an internal resource. Budget limitations may even prevent third parties from being relied upon for ongoing research and analysis. Procurement's need for supply market intelligence does not end with the signing of a supply contract. Intelligence is regularly relied upon during the term of any agreement to manage supplier performance, evaluate new alternatives, revisit delivery timing, and optimize relationships between the buying organization and suppliers. Building the in-house capability to gather information and convert it into usable intelligence presents an opportunity for the organization as a whole, for procurement as a function, and for the individual possessing or developing the skills.

The subjective, context sensitive nature of intelligence expands the career possibilities for professionals with the skills required to conduct research and then apply critical thought to the information gathered so that it becomes usable intelligence. The internal applications for these skills are numerous. Each opportunity to leverage supply market intelligence improves the abilities of the person creating it and increases their value to the organization. As cited in The Organization for Economic Co-operation and Development (2011), "Leiponen (2000) found that, in contrast to non-innovating firms, innovators' profitability was significantly influenced by the amount of higher education, higher technical skills and research skills possessed by employees." When these skills are embedded within the procurement function, the combination of external understanding and internal visibility has direct bottom-line impact. Beyond the financial rewards, the opportunity exists to differentiate the company's offering in the marketplace, and improve top-line performance, something included in an increasing number of procurement organizations' performance goals.

It is not unusual for professionals to find themselves in procurement after an unexpected twist in their career path, as opposed to a purposefully selected destination. As a result, talent acquisition, management, and retention are always high priority challenges for CPOs. In some cases, these professionals had not previously found the right environment for their skills, and they flourish in procurement. They learn to evolve in order to become successful individual contributors. There are a wide range of skills that are assets in procurement, including analysis, cost modeling, and negotiation. In addition to these "hard" skills, soft skills such as communication, creativity, and project management are critical to procurement's success. When any subset of these capabilities is combined with a general interest in learning how things work and why, empowering a person to answer their own questions through research leads to greatly improved results.

Just as procurement professionals often learn how to source on the job, it is realistic to expect that a person with the desire to develop their skills can learn how to conduct secondary market research in the same way. This is especially true when the motivation for the research is the pursuit of intelligence that can be immediately applied to a task at hand. When supply market intelligence capabilities are layered on top of existing knowledge of the processes and disciplines required to source products and services, the results can be surprisingly good. Research and analysis are best performed with a solid understanding of the end purpose as well as sufficient subject matter expertise.

An even better approach ensures the person doing the research has a vested interest in applying the resulting intelligence to improve their own job performance. Owning the process of creating intelligence provides procurement with an incentive to dig deeper into relevant supply markets, and for the rest of the organization to support them in their efforts and trust their recommendations.

An important distinction should be made between analyzing information in the context of creating intelligence and the process of conducting spend analysis — a discipline most procurement professionals are familiar with. When internal data sets and third-party data enrichment are combined during spend analysis, the resulting conclusions usually take the same quantitative form as the information on which they are based. Technology and automation are requirements for making spend analysis implementations and timely refreshes possible. With supply market intelligence, qualitative and quantitative elements are combined during the analysis process. The resulting intelligence reflects the qualities of both, creating a context specific combination of data and subjective information. While spend analysis has long been supported by a number of well-designed technology solutions, there is no corresponding tool for analysis in the pursuit of supply market intelligence. The closest resources assist professionals in accessing information (fee for use databases) or in managing the physical deliverables created as a result (knowledge management applications).

The quantitative, or measurable, information commonly used by procurement includes supplier financial data, market growth trends, raw material pricing, and currency conversion rates. Qualitative information is not captured as succinctly, but carries equal weight in the intelligence creation process. This information provides insight into emerging markets, competitive technologies, the implications of regulatory requirements, and innovative applications of existing solutions. Qualitative information enables the foresight required to craft a visionary supply management strategy. Neither type of information can be used in isolation to generate supply market intelligence. Qualitative information without data lacks substance and validation. Quantitative information without context does not reflect the full potential or risk level of the situation at hand. It is in their consideration and combination that quantitative and qualitative information are able to inform corporate supply strategy.

As we have said, intelligence is not big, fast, or loud, but it is also not fact. There is inherent risk when a judgment call has to be made that no amount of research or analysis will ever overcome. Within that risk exists the opportunity for differentiation. No other company in a market will see information or perform analysis in the same way because it is tied directly to the long-term strategy, internal view, and market position of the company in question. Certainty is an unreasonable expectation in today's rapidly evolving business climate, and decisions must be made in accordance with the best intelligence available at each moment. All information gathering and analysis must be done with an eye to the actionability of the conclusions and recommendations because only in its application does intelligence truly exist. When decisions are influenced as a result of research, the supply market intelligence process is complete. The company that does the best job riding the unpredictable tides of their supply markets is the company with the greatest potential for growth, innovation, and shareholder value creation.

MARKETS

In the most general sense, markets are groups of sources where companies locate the products and services they need in order to operate. They are also where companies sell their solutions or finished products. Just as each company must identify their addressable or available market as a way of assessing demand and determining revenue potential, they must also define the relevant markets when looking for a specific source of supply.

In the past, markets have been bound by traditional industry definitions and dominated by large players. Geography and the relative size and corresponding negotiating leverage of the buying and supplying organizations were defining factors, as well. A company's market share reflects "the percentage that a company has of the total sales for a particular product or service" and demonstrates the strength of the connection between a company's identity and the sphere in which they actively compete.

In The End of Competitive Advantage, Columbia Business School professor and strategy expert Rita Gunther McGrath discussed the requirement that businesses today be dynamic in order to compete, simultaneously looking for new markets to enter and watching for unexpected competitive threats. She illustrated this dynamic by highlighting the contrast between Sony and Apple in the music industry. This case shows how an established player (Sony) can quickly lose control of a market to a newcomer (Apple). According to McGrath (2013), "Sony provides a clear cautionary tale. It yielded dominance in portable music to Apple." No one would have expected Apple, a company historically focused on hardware devices and operating systems, to enter the music content business, let alone to undercut the prevailing physical delivery model of CDs with an entirely digital approach.

(Continues…)

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Excerpted from "Supply Market Intelligence for Procurement Professionals"
by .
Copyright © 2015 Jeanette Jones and Kelly Barner.
Excerpted by permission of J. Ross Publishing, Inc..
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Table of Contents

List of Figures and Tables x

Preface xi

A Note from the Authors xvii

About the Authors xix

WAV xxi

Part I Supply Market Intelligence Program Design 1

Chapter 1 Overview of Supply Market Intelligence 3

Intelligence 4

Markets 8

Supply 13

Chapter 2 Supply Market Intelligence as Part of the Procurement System 19

Strategic Sourcing 20

Spend Analysis 23

Supplier Management 26

Risk Management 29

Advanced Procurement Initiatives 33

Chapter 3 Supply Market Intelligence Creation Process 37

Step 1 Identify and Define 39

Step 2 Research, Read, and Refine 44

Step 3 Analyze 48

Internal Review: Approval Gate 53

Step 4 Document 54

Chapter 4 Supply Market Intelligence Research Tactics 59

Research Techniques and Tactics 60

Special Cases in Google 63

Using Research Resources Given in Part II 63

Read and Refine 67

Record 69

Special Research Cases 72

Chapter 5 The Business Case for Supply Market Intelligence 75

Building the Business Case 76

Methods and Metrics for Measuring Results 83

Supply Market Intelligence as Outreach 85

Chapter 6 Quality Assurance 91

Evaluating Information 92

Knowledge and Content Management 95

Citations 99

When to Pay for External Research 100

When Something Goes Wrong 102

When Something Goes Right 104

Part II Supply Market Intelligence Resources 107

Chapter 7 Research Resources 109

Overview 109

Methodology, Including the Web Added Value™ Feature 110

The Importance Of Social Media 111

Chapter 8 Supplier Identification (Not Market/Category Specific) 113

Chapter 9 Supplier Research, Diligence, and Risk Monitoring 119

Credit Reports/Risk Monitoring/Financial Health 121

Supplier Financials 125

Public and Private Company/Supplier Information 126

Comprehensive Resources with Both Financials and News Sources 128

Private Supplier Company Information 129

Supplier Information-Local and Regional Focus 129

Analyst Reports 130

Chapter 10 Industry and Market Research 133

Market Research One-stop Shops 134

Industry and Market Research Providers 134

Chapter 11 Best Practices and Operations Benchmarking 141

Chapter 12 Procurement Service Provider Directories 147

Chapter 13 Consulting Firms 149

Chapter 14 Procurement Professional Associations and Organizations 151

Chapter 15 Procurement Websites, Networks, and Communities 157

Chapter 16 Procurement Online and Print Magazines and Journals 161

Chapter 17 Procurement Blogs 165

Chapter 18 Procurement Basics-Dictionaries and Reference Sources 159

Chapter 19 Country and Geopolitical Risk 171

Chapter 20 Commodities Pricing-All Commodity Inclusive 175

Commodity Organizations and Websites 177

Government Data for Commodities 178

Market Intelligence Providers 179

Exchanges 181

Chapter 21 Agriculture 185

Background Information 188

Supplier Identification 190

Pricing and Market Analysis 191

Market Research Providers That Cover Agriculture Markets 196

Publications 196

Associations and Organizations 198

Chapter 22 Chemicals 203

Background Information 205

Supplier Identification 206

Pricing and Market Analysis 208

Publications 209

Market Research Providers That Cover Chemical Markets 210

Associations and Organizations 210

Chapter 23 Energy 213

Background Information 216

Supplier Identification 217

Pricing and Market Analysis 218

Market Research Providers That Cover Energy Markets 221

Publications 221

Associations and Organizations 224

Chapter 24 Metals 227

Background Information 230

Supplier Identification 232

Pricing and Market Analysis 232

Market Research Providers That Cover Metals Markets 236

Publications 236

Associations and Organizations 237

Chapter 25 Plastics 241

Background Information 241

Supplier Identification 243

Pricing and Market Analysis 244

Market Research Providers That Cover Plastics Industry Markets 246

Publications 246

Associations and Organizations 247

Chapter 26 Contingent Labor and Professional Services 249

Background Information 251

Supplier Identification 251

Fees, Rates, and Market Analysis 251

Publications 254

Associations and Organizations 255

Chapter 27 Information Technology 257

Background Information 257

Analyst and Research Firms 258

Resources That Analyze the Analysts 262

Industry-Specific IT Publications 263

Crowdsourced and Open Source Communities 263

General IT Publications and Websites 263

General IT Blogs 265

IT Associations and Organizations 266

Chapter 28 Logistics 269

Background Information 270

Supplier Identification 272

Pricing and Market Analysis 274

Trade Intelligence 277

Publications and Websites 278

Associations and Organizations 282

Chapter 29 Marketing 287

Background Information 290

Agency, Advertiser, and Media Supplier Identification 291

Rates, Spending Data, and Market Analysis 292

Publications and Websites 296

Associations and Organizations 297

Chapter 30 Maintenance, Repair, and Operations, and Facilities Management 301

Comprehensive Association and Trade Publication Lists 304

Background Information 305

Supplier Identification 306

Costs Pricing and Market Analysis 307

Publications and Websites 308

Associations and Organizations 310

Chapter 31 Travel and Meetings 313

Background Information 314

Supplier Identification 315

Pricing and Market Analysis 315

Publications and Websites 319

Associations and Organizations 321

References 322

Index 325