Using research and analysis in procurement encourages smarter sourcing. This begins with demand planning in the early stages of the development of your purchasing strategy. Using research helps your procurement team get on the same page, and encourages a culture that uses collaboration in the development of it’s strategy.
Here a just a few places where procurement research and analysis can support smarter sourcing.
1. Identify opportunities
Gaining an objective perspective of the market with procurement research allows a team to identify sourcing opportunities that can be approached more strategically.
Not all of your spend categories will be approached the same way. Research not only allows your procurement team to gain a better understanding of unfamiliar categories, but also helps to determine where there are places to improve your supplier partnerships, and identify leverage opportunities.
Using Porters 5 Forces and SWOT analysis in your procurement research is a metric by which an organization can identify the buyer and supplier power in a negotiation. Early in your demand planning, a procurement team can use research and analysis to categorize their spend with some form of taxonomy. This helps to determine whether the area of spend should be addressed using a strategic or transactional approach.
2. Supplier information
Once a procurement team has organized their spend, research and analysis helps to both identify and vet suppliers in a database. In many organizations, up to 80% of the company’s spend is delivered by 6% of their suppliers.
Objective procurement research and analysis provides a second set of eyes on the supply chain. Investigation into each supplier gives a procurement team the information that they need to make better decisions about their supplier partners.
Using conventional evaluation criteria such as the Altman-Z scores are okay, but procurement research should include an overall assessment of the the supplier’s financial statements, credit worthiness, and other criteria that could potentially impact the partnership with the buying organization.
3. Sourcing strategy
Nothing can help your procurement team in the development of its sourcing strategy like research and analysis. Having good information is a powerful piece of the purchasing process, and research and analysis in the early stages can help design an approach that is unique to each category, and provides the best outcomes.
Every procurement organization is unique so an off-the-shelf research option may not always produce the best outcomes. Industry specific category management requires a certain level of customization to get the most out of the information you are using.
Using actionable data and analysis your procurement research is important if you are looking to obtain tangible results in your sourcing strategy. The data and information should be tailored to meet your company’s needs and requirements.