The 12 Days of X-emplification: Day 8 – Market Intelligence

Market Intelligence is defined as information relevant to a company’s markets, gathered and analyzed specifically for the purpose of accurate and confident decision making in determining market opportunity, market penetration strategy, and new market development metrics on Wikipedia. For our purposes, it is essentially the information you need to make the right buy from the right supplier at the right time.

Before we get to the questions, I should point out that as we move away from technology into services, the number of questions with one right answer drop dramatically and it boils down to not whether the answer is right, but whether the answer is right for you. Thus, before you select a service, it’s important to know what you need so you will be able to properly identify what it is that you are looking for.

1. Does the firm undertake its own benchmarking – and how extensive is it?

Benchmarking is defined by Wikipedia as a process in which an organization evaluates various aspects of a set of processes in relation to best practice, usually within their own sector. In the context of a market intelligence firm, benchmarking is the process of not only tracking changes in raw material prices, but also tracking how well your projections have tracked over time. This allows the firm to continually improve their data collection and forecasting methods, which in turn allows them to continue to provide you with better intelligence over time.

If the market intelligence firm isn’t benchmarking their performance over time, then what value is their data providing you versus projections you can read in your average industry publication?

2. Does the firm track supplier financial performance over time?

You don’t just want intelligence on the raw materials and components that you buy, you also want intelligence on the suppliers that provide them. You don’t want to award a contract to a new supplier only to find that they go out of business three months later. Nor do you want to continuing doing business with a supplier when their performance is dropping.

3. Does the firm have commodity and category specific intelligence?

If you’re just looking for current pricing trends, then any data source will do. But if you’re looking for an understanding of why those trends came about, whether or not they’re likely to persist, and what changes in the marketplace could bring about a rapid change, you need to go to experts. Furthermore, if you’re basing your sourcing decisions on key categories on this intelligence, you better make sure you have the best.

4. Does the firm keep track of changes in industry regulations, supply, and demand that could cause all of their projections to be considerably off? And provide me with that data on a timely basis?

You’re looking for intelligence that tells you not only how things are, but how they are expected to be, at least in the short term. These projections are going to be based on certain assumptions. If changes in the industry or environment nullify those assumptions, chances are prices are going to change – maybe even dramatically. You want a market intelligence firm that tracks all of the relevant industry regulations, environmental conditions, and supply availability information and notifies you if something changes so that you can re-analyze the situation and, if necessary, take appropriate action.

5. Does the firm have models that break down cost components and explain discrepancies?

If the price of a commodity increases by 5%, there’s a reason. Typically, it’s because either the costs of one or more component raw materials have increased, or the cost of labor has increased. Without appropriate cost models, the firm supplying the market intelligence will not be able to explain why. Furthermore, you will not be able to model what the impact is of copper going up 5% if you don’t know how much the cost of copper is contributing to each of the commodities that you buy.

6. What types of information is included? Pricing Trends? Market Trends? Best Practices?

Most market intelligence will include pricing trends. However, in order for you to make good sourcing decisions, you also need to be aware of significant market trends. But if you really want to get the most from your market intelligence firm, you also want them to report on best practices being employed throughout the industry that you can use to improve your sourcing efforts.

7. How current is the intelligence?

In order for the intelligence to be useful, it has to be recent. If you’re engaging a market intelligence firm to help you track prices and trends on raw materials, commodities, and services that are critical to your organization, you want to know that the firm is redoing their category and commodity reports at least yearly, providing market updates at least quarterly, sending you important alerts at least monthly, and tracking relevant data daily.

8. Which audience is the intelligence focussed on? Corporate Research? Financial Analysts? Sourcing Professionals?

Although all types of market intelligence is important, as a sourcing professional you need intelligence relevant to you. Make sure the reports that the firm produces are for sourcing professionals first and research analysts second.

9. Is raw data access available?

Maybe a report includes the analyses you want to see, and maybe it doesn’t. But if you can access the raw data and the cost models, you can do your own forecasting and analyses based on different what-if scenarios and see how much a potential award could save you, or cost you, if certain changes happened in the marketplace.

10. Does the provider offer custom research?

Most market research firms have a set of raw material, commodity, and service categories that they track by default. Although these raw material, commodity, and service categories may be sufficient for your initial needs, the situation could change in the future. Unless you want to build relationships with multiple market intelligence firms, and pay the premium that is associated with retaining multiple firms, you might want to select a firm up-front that will produce custom research on an as-needed basis.