What is market intelligence in procurement?
Procurement is crucial for every business, and market intelligence (MI) is the bedrock of procurement process decisions. Information about the product or material sourced, available suppliers, cost, and other crucial information let the business negotiate the best deals. This information may change with time; hence, a regular update is vital.
The procurement department is the one that first-hand deals with the raw materials and finds the leading suppliers as well. A wrong supplier or raw material selection can heavily impact the business, so you have to get as much information from all the available sources.
Why is market intelligence (MI) necessary for procurement?
The sourcing of raw materials on time at a reasonable price while keeping the budget in mind. The time management and cost involved in the procurement impact the whole manufacturing process of the firm.
Hence, the decisions made at this time are vital. As the procurement decisions are made as per the MI report, the results will be favourable for the business most of the time.
So, the firm’s grasp on the intelligence available is significant to the firm’s success. Using this market intelligence has become necessary for the manufacturing firms, and better the intelligence, the successful the business.
What are the components of procurement MI?
There are three significant components of procurement MI. They are:
- Research
- Analysis of the competition
- Analytics
Each component helps the management accumulate raw materials at the right amount and time.
What are the benefits of procurement market intelligence?
Utilizing software tools for procurement assists the manager in understanding the massive amount of data available.
The benefits of procurement market intelligence (MI) can be listed as below:
Supplier selection
The right MI provides the buyer with the details about every supplier in the market. The best part of MI is the same, offering the track record of the suppliers and how stable they are in the business. It gives the buyer an accurate idea about the suppliers and their reliability. Reliability and cost-effectiveness (of supplier) play an essential role in procurement management.
Spend analysis and trends
The MI helps the firm acquire the best material at the best rate. Management of the procurement timeline lets the management understand and pre-plan for other expenses such as transportation, storage, and other expenses.
Having top-level software lets the management analyze the expenses and compare them with the present market trends. This results in the gradual improvement and refinement of the supply chain.
Risk monitoring and mitigation
A good MI software helps the buyer/firm understand the risks associated with the supplier. For example, suppliers that offer low rates may be located in remote places, disrupting the supply chain. A supplier who is more stable and close to the manufacturing firm will be the best choice, and only the procurement MI can dig the details by analyzing the massive chunk of market data.
Speed up approvals
Significant procurement decisions require the approval of the management. Having a procurement MI report will help the management understand the authenticity and stability of the supplier. Once the supplier details are available to the management, approval or rejection can be made quickly.
These are the benefits of having the procurement MI in the organization. Procurement is the first and most crucial part of manufacturing. Hence, the department has to take essential steps to make the initial manufacturing stage successful. If your firm has this software, the procurement process will go smoothly.
