Embed Size (px)
Citation preview
thesmartcube.com
W H I T E P A P E R
Market intelligence has a key role to play in the elevation of procurement to a strategic function. This paper explores how market intelligence can drive category management excellence, including:
uu Why category managers need robust market intelligence to excel
uu The benefits that a smart approach to market intelligence can bring
uu Six options for sourcing market intelligence – and the pros and cons of each
uu How to craft a market intelligence strategy that will deliver optimum results
uu How leading organisations use market intelligence to gain competitive advantage
Achieve category management excellence with robust market intelligenceA guide to finding the right intelligence and the right partner for your business
2 / thesmartcube.com
W H I T E P A P E R
58%of procurement leaders said elevating procurement to a strategic role was a high priority for 2018
– Hackett Group Key Issues Study 2018
3 / thesmartcube.com
W H I T E P A P E R
Executive summaryCategory managers need market intelligence – but not all intelligence is equal
Many organisations are in the process of procurement transformation; turning it from a blunt instrument focused on cost savings into a fine-tuned engine geared to deliver strategic business advantage.
Driving that shift is a new breed of category manager: a smart and entrepreneurial professional whose aim is not merely to find the lowest price for a given category of purchase, but rather to craft a strategy for the category that puts the organisation ahead of its competitors.
A complex environment demands more and better intelligence
In a world of complex, global supply chains and volatility in pricing and supply, category managers need all the intelligence they can get in order to make the smartest decisions. That’s why Hackett Group identified market intelligence as one of the top analytics investments that procurement organisations plan to make by 20201.
But not all market intelligence is created equal, and category managers will need to find the right approach for their organisation and for their own needs. This paper explores the advantages that the right kind of intelligence can bring, and the options available to category managers who want to build a winning market intelligence strategy.
1 Hackett Group, Key Issues Study, 2018
4 / thesmartcube.com
W H I T E P A P E R
In a complex world, category managers must be better informed
Organisations that take a category management approach have tended to do so as part of a transformation where procurement will play a more strategic role in delivery of the overall corporate objectives.
Rather than focus purely on delivering cost savings, category managers are invited to use the knowledge, expertise and tools at their disposal to craft a strategy that will deliver competitive advantage back to the organisation.
But the nature of the modern supply chain means category managers must craft that strategy against a backdrop of increasing complexity and volatility:
uu Supply chains becoming more complex – Globalised supply chains mean procurement executives must keep on top of complexity in movements in the supplier base (including M&A, expansion and insolvency); changes to national, regional and international policy, tariffs and regulations; and emerging innovation where new patents are being filed worldwide.
uu Growing volatility in pricing and supply – Factors including tensions between former trading partners (such as the US and China, and the UK and the European Union); extreme weather events related to climate change; political upheavals in key sourcing countries; and continued volatility in oil and other commodity prices are creating uncertainties around pricing and supply sources.
uu Managing and mitigating risk – Category managers are being asked not just to deliver savings but also to identify and manage supply-related risk, and to help the business find ways to achieve its strategic goals more effectively – all while under increasing time pressure.
uu More data, from more sources – Technology advances like the Internet of Things (IoT), sensors and machine learning mean category managers are now deluged with supply chain data from internal and external sources. However, they don’t always have the time or the expertise to extract accurate insights from it, use those insights to drive strategy and underpin decision making, or visualise the insights effectively for stakeholders.
uu Corporate social responsibility remit – The procurement function is increasingly becoming the home of CSR within businesses, adding another layer of accountability, and of course risk to manage. Category leaders now need to incorporate CSR requirements into category strategies – which can present opportunities as well as challenges.
The complexity and volatility of the supply environment means category managers increasingly need to draw on specialist resources and tools to help them define the right strategy. Market intelligence is emerging as a key resource.
5 / thesmartcube.com
W H I T E P A P E R
The business impact of exceptional market intelligence
Case study
Cost modelling delivers $2.7m packaging saving for global food processing company
The challengeuu Optimise spend on flexible and rigid
packaging, by using market intelligence to create quantitative tools for the procurement team to leverage in supplier negotiations
The Smart Cube solutionuu Evaluated demand-supply dynamics for the
rigid and flexible packaging industry, including market size, structure, end users, key trends, supplier landscape, best practices, and regional cost driversuu Conducted 100+ interviews across regions to
get insights on fixed and variable costs across all categoriesuu Developed should cost models for the rigid
and flexible packaging categoriesuu Prepared a dynamic cost model for the
rigid and flexible packaging categories with forecasts for 2–3 years
The resultsuu Achieved a $2.7 million global saving on
packaging by using the cost model to negotiate more effectively with suppliers
Market intelligence has value far beyond the ability to fill gaps in procurement teams’ knowledge of the products, markets and supply sources they work with.
The right kind of intelligence can deliver far-reaching benefits on many levels, affecting everything from the business’s ability to compete, to the innovation pipeline.
With access to objective, reliable and contextual market intelligence, category managers can:
uu More easily solve specific business challenges – from achieving cost reduction targets to delivering on innovation mandates or addressing corporate social responsibility goals
uu Achieve category management excellence – with robust strategies to optimise cost and better manage and reduce risk
uu Reduce and avoid costs – with the ability to benchmark pricing more clearly, unbundle cost models and evaluate substitutes more thoroughly (see case study)
uu Build better supplier relationships – by combining market intelligence with internal and supplier data to find the right partners and develop value-added relationships
uu Manage volatility more effectively – by predicting and mitigating changing prices in commodities and feedstocks and for political, economic and infrastructural upheavals in source countries
uu Build credibility with stakeholders – by demonstrating knowledge of the category, providing value-added insights and recommendations, and working with stakeholders to make improvements for them and the business
6 / thesmartcube.com
W H I T E P A P E R
What makes great procurement market intelligence?For market intelligence to have a significant positive impact, it must align closely with what the business needs. Not all market intelligence is created equal, and the best results will come from intelligence that has these six characteristics.
SpecificA lot of the questions asked by category managers are extremely specific. They might want to know, for example, how switching a supply source from Brazil to South Africa might impact costs and risk. Intelligence that can answer that specific question, for that specific business, has far more value than general research on the market in South Africa.
ContextualIntelligence must be contextualised to the business and end-users, with analysis that leads to actionable insights and not just more noise. Only by ensuring that relevant and reliable insight is distilled from multiple data sources will category managers get guidance on the “so what”, to support goals around innovation, risk manage-ment and category excellence.
ObjectiveDecisions made on inaccurate or biased intelligence may not be the right ones for the business – and may even be actively damaging. Independent intelligence that isn’t biased towards a particular organisation, geography or worldview will provide a more reliable foundation for decision-making.
CurrentThe market environment is constantly in flux – look at how the price of oil fluctuated unpredict-ably throughout 2018, for example, or the impact of China's swine fever outbreak, which is driving up global pork prices in 2019. Intelligence based on last month’s or last year’s data can lead to sub-par decision-making, and may even damage procurement’s credibility with stakeholders.
MeaningfulIntelligence that is poorly presented (for example, in multiple spreadsheets) runs the risk of being misinterpreted, or it can take a long time for different stakeholders to understand what they’re looking at and come to a consensus decision about what to do. For best results, intelligence should be presented in a compelling and immediately meaningful way to everyone who needs to use it.
RobustWhen making strategic decisions, category managers need robust, reliable evidence drawn from multiple data sources. The cost indicated by a single supplier isn’t sufficient to build a robust country model, for example – it requires many data points, including logistics costs and the cost of production in each country. Triangulating each data point with at least two other sources will create a rich, accurate picture.
7 / thesmartcube.com
W H I T E P A P E R
Case study
Power generation equipment company gains insight to negotiate more favourable pricing from incumbent engine supplier
The challengeuu A power generation equipment provider wanted to
explore cost reduction opportunities from identifying suitable alternatives to its incumbent supplier of power genset engines
The Smart Cube solutionuu Our patent and technology experts leveraged
intelligence generated from recent patent filings, technology articles and potential suppliers’ innovation initiativesuu Our analysis showed that engine manufacturers primarily
compete on technical expertise and that adherence to emissions norms is a key criterion in selecting suppliers
uu We found that the incumbent was one of the leading innovators, with a focus on emission reduction technologies and plans to add new energy saving featuresuu As a result, The Smart Cube recommended that the
client stay with its incumbent supplier, both for business continuity and because of its technology focus and future readiness
The resultsuu The Smart Cube provided robust levers to help the
client negotiate with the incumbent – including around the cost reductions arising from its innovations in materials and energy saving
8 / thesmartcube.com
W H I T E P A P E R
Six ways to source market intelligenceWhen sourcing market intelligence, category managers have six broad options. Many will find that combining two or more options will provide the right kind of intelligence at the right time.
Internal sources
1 Desk research – An internet search of freely-available sources, such as trade publications, analyst reports and supplier websites, can yield quick answers to simple questions. While it costs nothing (apart from the time spent), the data isn’t always objective or aligned to the question being asked, and as it’s available to everyone, it doesn’t provide an advantage. It’s often a good starting point, but relying solely on internet searches can lead to poorly-informed decisions and less-than-optimal results.
2 Information from suppliers – Suppliers and internal stakeholders can be useful sources of information, offering specific knowledge of individual products, categories, countries and factors affecting the supply chain. This information can be helpful, but should be triangulated against other independent data points to remove any bias and to gain a more rounded picture.
3 Internal intelligence team – Organisations that are serious about procurement’s strategic potential may consider establishing an internal intelligence team to research specific queries. This can transform procurement’s contribution to the business, but it represents a major investment and the necessary data science and data engineering skills may be hard to find.
External sources
4 Syndicated intelligence provider – Conducted and funded by a market research firm, independent research from a syndicated intelligence provider can deliver reliable, objective, high-level data on market trends. However, the templatised (i.e. standard)reports are designed for a broad audience, so are unlikely to offer the level of granularity needed to answer specific questions.
5 Custom intelligence provider – A custom intelligence partner can provide robust, objective and evidence-based research in response to specific questions – often using a mix of market data and the client’s internal data. They can also conduct primary research to get information directly from sources, which can be difficult to do in-house. These firms tend to employ teams of skilled and specialist analysts and data scientists, and use the latest technologies to gather, analyse and visualise the data so that it can be used straightaway.
6 Hybrid intelligence provider – A new breed of hybrid provider is emerging, offering both templatised research reports into key issues and customised intelligence services to answer specific queries.
9 / thesmartcube.com
W H I T E P A P E R
ChecklistHow to get the right partner and the right intelligence
More procurement organisations are choosing to source market intelligence from an external partner, recognising the value of objective and targeted research. Hackett Group found that 31% of organisations work with an external partner today, and another 8% plan to do so within 2-3 years.
But not all providers work in the same way, and to get the right intelligence and the right partner, category managers need to ask the right questions. This checklist will help.
Getting the right intelligence
uu What are the objectives of the study; what business problem are we trying to solve?
uu How will we use the research; and who will use it?
uu Is there a hypothesis we would like to have proved or disproved?
uu What are our must-haves and nice-to-haves?
uu What internal intelligence sources do we have at our disposal, and do we have access to it?
Getting the right external partner
uu Can they integrate internal and external data sources to answer our questions effectively?
uu Can they provide a hybrid solution – both templatised ouput and truly custom for deeper dives?
uu Can we use the intelligence they provide as-is, or will we need to do extra work to get it into ‘user-ready’ mode?
uu Can they deliver the intelligence we need in a seamless, ongoing and timely manner, supported by suitable tools and technologies?
uu Do they have specialisms in relevant sectors and categories for our business, and breadth and depth of skills?
uu Are we confident the intelligence they provide will deliver a tangible return on investment? Can they demonstrate a strong track record?
uu Can they truly integrate seamlessly with our category management teams and infrastructure?
10 / thesmartcube.com
W H I T E P A P E R
Case study
The value of custom intelligence: $3.75m savings for a scientific and industrial equipment business
The challengeA manufacturer and reseller of scientific and industrial equipment was challenged by its private equity owner to look at alternative vendors for high-spend, high-impact categories in best cost countries – with a large savings goal. Having never evaluated alternative suppliers, the company enlisted The Smart Cube’s help to answer key questions such as: uu Which alternative suppliers could feasibly replace our existing vendors?uu How much could we save by switching suppliers?uu Can we identify alternative vendors quickly and discreetly? uu What best-cost sourcing intelligence can we use to better negotiate with incumbents?uu Are there other markets we can source from to avoid cost escalations from tariff increases? uu What factors are driving up our costs with incumbent suppliers? uu What key benchmark selection criteria should we consider?
The Smart Cube solutionThe client’s category managers typically use internet searches and supplier information to gather intelligence, but a more robust solution was needed to get answers to these complex questions. The Smart Cube gathered the required intelligence by conducting the following exercises:uu Review existing spend to identify high-spend categories; categories most likely to be impacted by tariff increases;
and tail-spend categoriesuu Study the supply markets for each of these categories at a high level to determine their size, structure, composition
and dynamicsuu Identify best-suited suppliers in emerging markets and launch a mini-RFI to quickly gather capability, ability to serve
volumes, and price bids from themuu Build a should cost model, comparing the client’s product specs for geographies where the incumbent is based with
geographies where potential suppliers are based uu Leverage primary and secondary research to provide negotiation intelligence
The resultsUsing this customised approach, The Smart Cube was able to identify savings of $3.75 million across seven categories – an average of 58%, and as much as 70% for some categories.
11 / thesmartcube.com
W H I T E P A P E R
ConclusionUnlock the full value of market intelligence
Market intelligence has a key role to play in the elevation of procurement from an operational function focused on cost savings, to a strategic function focused on making the business more competitive.
For best results, intelligence must be aligned to the specific problems that the category manager needs to solve, and must be robust, objective and detailed enough to provide not just answers, but the right answers to drive the right kind of decisions.
The Smart Cube works with progressive procurement
organisations around the globe to deliver robust customised
intelligence solutions to help those organisations to compete
and succeed.
To learn more about what we do and how we can help, visit
www.thesmartcube.com.
The Smart Cube is a global provider of research and analytics solutions, primarily serving the CPG, financial services, retail, life sciences, energy and industrials sectors.
Addressing the needs of businesses in the intelligence age, our customised solutions provide a truly connected approach, delivered by talented minds and strengthened by Amplifi, our organisational intelligence platform, rich with knowledge, cutting edge tools and advanced analytics.
We work with a third of companies in the Fortune and FTSE 100, helping them make smarter decisions, accelerate value and gain a competitive edge.
Headquartered in the UK with additional offices in the USA, Switzerland, Romania and India.
Intelligence. Accelerated
thesmartcube.com
United KingdomNo 1. Farriers Yard77 Fulham Palace RoadLondon W6 8JAUnited Kingdom
United States33 N. DearbornSuite 805Chicago IL 60602USA
SwitzerlandBaarerstrasse 146300 Zug Switzerland
RomaniaFloor 5, Entrance B,2 Martin Luther Street,Timisoara, 300054Romania
IndiaTower B, Windsor IT Park, A1, Sector 125Noida, 201301India
Intelligence. Having it is one thing. Applying it is quite another
Data. It’s nothing without interpretation and insight
Insight. We see more. Because we look for more
Intelligence. It’s what you do with it that counts
Intelligence. Accelerated
