Purchasing Intelligence Function

Percieved World Around.pngDo you make decisions based on how the world around really looks like, or based on how you perceive the world around, i.e. based on what you actually know about it?

How do you help the buyers in your purchasing community to become smarter and stronger in negotiations?

Answer: Build a function for Purchasing Market Intelligence!

This is what some buying managers say about their company’s Purchasing Market Intelligence (PMI) function:

“By keeping track of the market factors which influences my business, generally and specifically, I will become more aware of real costs and excited to secure my future competitiveness.”

“By using PMI among my other key information sources, I avoid so called “information overflow” and keep my purchasing market monitoring simple and focused, supporting good decisions.”

“By knowing what is affecting my prices and how much we should really pay for a certain product, I will as a purchaser enter the negotiation table more equipped with hard facts and confidence.”

Purchasing Market Intelligence builds on the same principles as Competitive Intelligence, that is more common in the field of Market Strategy and Sales. It’s all about identification of the company’s (procurement department’s) information needs, gathering the desired information, analyzing it and valorize it into intelligence, and spreading it to those persons who need the information.

CI cycle

In other words, the process of Purchasing Market Intelligence can be explained through below steps:

  1. Identify what the company needs to know
  2. Gather information about the business environment
  3. Use internal and external info sources
  4. Select and compile key information
  5. Analyze – build up knowledge
  6. Spread intelligence to decision makers
  7. Decide and act smartly!

The objective of PMI is well illustrated through Michael Porter’s 5-forces industry analysis. PMI strengthens the buying company’s power toward the suppliers. Se below:

Increase Buying PowerThe scope of the intelligence work is defined in the very beginning of the process. The information need of the company can be shown is below “Intelligence Map”. Now, the challenge will be to find the optimal sources to be utilized for continuous tracking of these factors in the world around. Optionally, a business analyst will manage the coordination of the PMI process, and add value to the information through his/her analysis and spreading of the information to the right persons in the right time.

Intelligence Map

Read all about Purchasing Market Intelligence in the pdf-presentation. Installing a smart function for PMI is easier and less costly than you think. You don’t even need a full-time employee for managing the function and the continuous tracking system. Invest in your procurement human capital! Become a more intelligence sourcing team! Establish a function for tracking and analysis of the factors in the world around that impact the company’s sourcing activity.

pdficon_largeDownload the complete 50-slides presentation about Purchasing Market Intelligence, containing two real business cases. Click on the PDF-icon or here.

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