Buyers Ask: What Is Market Intelligence?

PurchTips - Edition #146 February 26, 2008

By Charles Dominick, SPSM

Do You Know How Buyers Use Market Intelligence?

Recently, you may have heard a lot of buzz about "Market Intelligence" becoming a more significant piece of the strategic sourcing process. But what is it? "Market Intelligence is the process of gathering and analyzing information relevant to a company's supply markets specifically for the purpose of supporting accurate and confident decision making in the procurement process," explains David Hargraves, the Director of Strategic Sourcing for a leading healthcare organization. According to Hargraves, the output of a Market Intelligence process will include:

• Commodity Profile. This lists information about the product's/service's classification, market size and growth rate, manufacturing process, and critical-to-quality factors.
• Cost Structure. This section identifies the costs associated with materials, labor, transportation, energy, overhead, profit, and other cost components.
• Supply Base Profile. This identifies available suppliers, their characteristics, and countries where suppliers of the category are located.
• Market Indicators. This section identifies demand and price drivers, capacity utilization, and other characteristics that determine price and availability.
• Competitive Analysis. This section assesses buyer and supplier power, substitute products/services, and other factors that influence your buying leverage.

Conducting Market Intelligence can reduce risk, increase savings, improve decision-making, and offer "the ability to challenge some of the assumptions you've had," says Hargraves. "If you regularly bid out a given commodity or spend area to the same supply base, you are always going to get similar results."

Among its applications, Market Intelligence can be used to discover new suppliers, new capabilities of existing suppliers, and countries where capable suppliers can be found. Hargraves says it can also help you gather data on supplier financial viability and business continuity, build cost models for use in negotiations, and find early warnings for supply market changes.

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Want to learn more about today’s topic? Then check out my podcast interview with David Hargraves! Podcasts are audio files that you can listen to on your PC, download to your iPod/MP3 player, or burn to CD.

It’s absolutely FREE to download the audio. So why not add to your collection of great purchasing education material?