I interviewed Kelly Barner who discussed Supply Market Intelligence for Procurement Professionals.
What is SMI?
Supply market intelligence is all about giving procurement an opportunity to leverage external sources of information that can then be combined with a unique and company specific internal perspective on either the suppliers or the spenders being managed and to combine those two things, to take the external information and the internal perspective and combine them into something actionable that ultimately changes the direction of the strategy or the category plan that is executed. One of the things that my co-author Jeanette and I wrote about in the book with regard to what’s the difference between information, intelligence, knowledge, separating some of these things that seem similar but really are distinct from one another.
Intelligence has to be applicable and it has to be actionable. You can have a piece of information or a nugget of knowledge and there is value in those things. But what differentiates those from intelligence is that it's something you can take action based upon. One of the other things that we talk about with regard to this actionability that really proves you're working with supply market intelligence is that it's actually an action, not to take a certain step. And so when we talk about helping people understand when they've created intelligence, it's about understanding that in some cases intelligence will inform a strategy that directs the company to go and take certain actions. In other cases, intelligence informs the decision not to take decisions that otherwise would have been taken but would have proven either suboptimal or disadvantageous to the company.
Sometimes intelligence will inform a decision to not take place. The real idea of all of this is that in the past, procurement has been fairly data driven and most of that data has come from within the company. It might be information on suppliers, it might be spend data, and this is very valuable and it still plays a part in informing intelligence moving forward. But that can't be the only perspective that's brought there. Procurement and companies are so driven and influenced by external forces these days and some of that we look at in the context of supply chain risk or things associated with globalization or raw materials markets. But really what it means is that procurement is going to take the most expansive approach to category strategy possible, we have to make sure that all of our decisions and recommendations are influenced and informed by our internal information as well as by information that's available from analysts, from suppliers, from organizations, and from news sources as well.
Why is SMI important?
Supply market intelligence is particularly important to procurement today I think for two different reasons. One is because of the shifts that are taking place in the larger markets. And the other is because of the shifts that are taking place within procurement itself. So if I start by looking at what’s taking place in the markets, certainly our supply chains have grown longer. We are doing more with suppliers than we've ever done in the past. And the lengthening of supply chains, certainly it introduces risk but it shouldn't be seen as a negative thing because it also introduces opportunity. And just as we've seized opportunity in the past to maybe buy a product or a material from a lower cost place, somewhere else, or contract for a service in a different country because we can get more advantageous fees for the same quality of service, we're also seeing that new qualified alternatives are coming to bear all the time.
In the past, procurement would take a very apples-to-apples approach to qualifying solutions being considered when a proposal was being looked at. And it was very literal. So you would have some number of suppliers, all of whom could provide a product that accomplished the exact same thing as one another. And so the decision basically came down to what is the price they're able to offer it at, what sorts of service level agreements or contract terms does it come with, what sorts of other benefits to working with supplier is there? That is what we largely inform our decision.
But today, we're looking at things from a more objective focus standpoint and that is wonderful because it broadens our options. And so what we might say is, rather than pricing out in tremendous detail this product, what we will say instead is, we need something that meets the following requirements or we need something that allows us to accomplish this objective. And that allows the suppliers to introduce their own perspective around materials or combinations of materials or the exact size or how something is assembled. So while you may not have an exact apples-to-apples comparison, you have a greater opportunity to accomplish something unique, which contributes to competitive advantage. So where supply market intelligence comes to play is that not only does procurement need to know that the possibility of these alternatives exists, but we need to know how to structure the bid so that we allow the right level of variability into the decision making process without compromising what procurement was designed to do, which is to find the right products and services that accomplish what the organization needs and find the highest value proposal for bringing those in house.
Now the second thing, is what is going on within procurement itself right now?
In the past I think we were very transaction oriented. We were looking at very narrow ranges of spend when we were bringing things under management. But we were increasingly being given the opportunity to participate in more value oriented activities. And in some cases, these actually extend outside of either buying things. Procurement might be given an opportunity to collaborate in a research or design process with a supplier. Or we might be given the opportunity to participate in mergers and acquisitions activity. Our ability to go out and pull external information that can be digested and refined and then used to motivate discussion or inform decisions, is incredibly important for what it allows the company to accomplish, but it's also important within the context of how it positions procurement within the organization as a group that is not just capable of working these processes or managing these suppliers, but also in doing the research that broadens the mindset of entire decision-making teams as they enter into a project whether those projects have anything to do with buying a product or service or not.
How do you create SMI?
Now when it comes to the actual execution of supply market intelligence, there's sort of good news and bad news from an investment standpoint. So the good news is, you don't actually have to invest a lot of money in paying for access to articles or data services in order to get it done. These are very fortunate times and that there's an awful lot of verifiable, high quality information available for free on the internet if you know how to find it. Now what that does, is it presents a challenge in that the difficulty is no longer finding the information, but in filtering and making sure you have the right quality information with an objective viewpoint. So, whe're in the past you would be going to a very narrow range of expensive data services that you knew were providing you with objective, collective, validated information that was up to date and applied to what you were going to search for a. And the work for you was then, just simply digesting that and applying it to your situation.
Today you don’t have to pay the money for those services.
What you have to do is invest the time to go out and find the information, read through it all and make sure you're dealing with an authoritative source, that the information is up to date enough to still be applicable, and you need to validate it. So we often talk about the idea of triangulation which is something that comes up a lot at least with procurement and spend analysis. Where if you're trying to understand the context of a piece of data, you're going to look at several different sources and sort of connect what they tell you to round out what you understand about that spend. The same is true for supply market intelligence. So what you're doing here is if you find a fact or an idea or a lead that is surprising or goes against what you would have considered to be conventional wisdom, rather than saying,“oh, we found this new piece of information, we need to completely change course and do something completely different,” what you're going to do is say,“okay, I found an outlier, I need to ensure the validity of this outlier.” And so you will go off and see if you can confirm it from another source or have someone that's an expert in that area, give you a good confidence level that even if that outlier piece of information doesn't become the sole driver for your strategy, it can at least be factored into conversations.
Now the process that Jeanette Jones and I laid out in our book on supply market intelligence is an iterative one. We start with an initial three steps which is research, read, and refine. And what that basically sets up is you're going to lay out a basic framework for yourself. What are the few terms or names or phrases that I need to go research? You do initial Internet searches, you read information, you give yourself an opportunity to absorb it and think about what it means. And then you refine that initial search strategy. You say,“I need to dig deeper into this area,”“I don't need to worry about this area.” Or you realize that you have more questions than you initially thought you did. Sometimes it requires going back to a supplier or a cross functional internal team to clarify exactly which area you need to be in, and to some extent that's going to depend on whether you have a category driven procurement team, where people are focused always on logistics or always in marketing or whether you have more of a process driven team where everyone is more general from a category perspective but knows how to drive that process effectively from beginning to end. So you're going to go through the research, read, and refine multiple times. Really until you get to that point of diminishing returns.
Then you stop and you work on documenting the information such that it can be shared. At this point we recommend stopping and having an internal approval hurdle. So what you're going to do if you're the person who has been responsible for doing the research and collecting the information and putting it to paper, you're then going to stop within procurement and you're either going to meet with the CPO or the category lead or just going to pull together a number of other colleagues that understand what you're trying to accomplish and you're going to present to them what you have found. And what this allows you to do is have a quality assurance on the process. It's going to make sure that some of the obvious questions or the obvious holes get answered or filled in before that documentation leaves procurement and goes elsewhere in the organization. Once it has passed that hurdle, at that point you're really working on the research or an executive brief. And the goal of this is to keep it brief. It doesn't have to be all encompassing, it needs to hold enough information to capture the attention of the person or team that you're presenting your recommendations to. It is important in that that you lead with facts and numbers.
Of course, documenting the sources that those came from is critical. Nobody expects that in order to be good at creating supply market intelligence that you go out first hand and do all this data collection yourself. It's more about being able to validate that you've pulled information from quality sources. And it gives you an opportunity to put the basic facts in front of people. Get their attention and hold it long enough to fill in the blanks by becoming an information resource yourself. So having gone through that research, read, and refine process, you as a researcher within procurement are enriched. Your knowledge and understanding are enriched. And it means that the person accompanied by the document in the right meaning context is a very powerful combination in terms of what enables the organization to accomplish.
How have I seen SMI be effective?
There are a couple different scenarios where I have seen supply market intelligence prove itself to be particularly valuable to procurement. One is actually purely internal. If procurement finds themselves leading a sourcing or other project with internal stakeholders that are very well informed in a category or an industry or a market, and also very influential in the organization, it definitely benefits procurement to be educated enough in that category to earn that cross functional team's respect and to ask good questions. The goal is not to be able to walk into a meeting and go toe to toe with people that have specialized in a particular area. But you do want to be knowledgeable enough to be more than just an information gatherer. You want to know the appropriate questions to ask, what things you should be inquiring about how the company currently handles things or why you work with an incumbent supplier versus an alternative. Simply asking blank questions that seem like they're asked in every category isn't going to do a whole lot to demonstrate that procurement is a worthwhile and strategic function, to invest time in over the course of the project. So that's one area where supply market intelligence can be very effective.
Another is sort of the corresponding external version of that and that's where procurement is put into a position to need to negotiate with very knowledgeable suppliers and while most negotiations are based on an RFP or an RFI or an RFQ process, where some sort of information gathering has already been done, you know that when you're in that negotiation session, external information is going to be brought in as a justification for why prices can't be changed, or why terms need to be set in a certain place. And the more informed procurement is, just like with the cross functional internal team, the more likely they will be able to be to earn the respect of the suppliers that they're sitting across the table from. And this in fact, can convert directly in to benefit either in the form of prices or in service levels for the company.
Now not that it's the only third but I would say the third big area where supply market intelligence can be particularly effective is when something is being purchased for the first time.
This might be a case where it's not that the spend has been unmanaged in the past or you have legacy suppliers and they've just sort of always done things the way they've done them, this is the company looking to buy a product or service for the very first time. So there are no incumbent suppliers. There are no internal owners of these relationships or owners of the product or service that are knowledgeable about what the company needs and what the company should expect from a supply partner. When you're looking to do something for the first time, you need to have an understanding of the range of things that are available in the market, what will affect the availability or the cost of those things, what risks needs to be planned for, and also what internal conversations need to be had about exactly how that product or service will be leveraged as part of the company's overall program. And this is where procurement's ability to go out and find new information, bring it back in a digested actionable format, can really inform decisions and enable the company to accomplish something in a very purposeful way that they would not have otherwise been able to do.
Can you provide a brief background of yourself
My background in procurement is not unlike that of many other people that are in the field. And that is, I was not five or six years old telling everyone that I wanted to be in procurement when I grew up. I sort of fell into the field. And part of the advantage to that is I came to procurement with the library and information science degree that ended up positioning me to be able to bring supply market intelligence capabilities to the field. But it gave me an opportunity to see some other things before I got here. My initial start was as a practitioner. I worked for a not for resale sourcing team at a large US based food retaile and food service company. From there I made the switch and I actually spent several years as the associate director of consulting at Emptoris before they were purchased by IBM. So they were an e-sourcing/analytics provider and I worked on the services team there. Which was also great because I got to, once I had established my understanding of process and technology and what needed to be done, I got to see the application of that in a number of different sized companies as well as different industries. Because each situation and context does bring with it different requirements and different opportunities for success.
Now after doing that for several years, the travel started to become a little bit of an issue and when the opportunity came up to join Buyers Meeting Point, I jumped at it. It was a largely virtual opportunity, it gave me the opportunity really in its simplest form to learn for a living, which I love. And so in the earliest days of Buyers Meeting Point, we were mostly just collecting information and when we find that our collection of resources intended to allow procurement professionals to do their jobs better, had gotten so large that people were looking for help finding what they needed from their own collection, we shifted and our function became more of a filter than as a consolidator. And so we started recommending books and blogs and events and information resources that we felt like were valuable to others. And the only way to truly make that determination is actually to consume the content yourself. So you attend events, you read books, you read blogs, you listen to thought leaders, you watch for trends and you share what you've learned with others. And that's what I think led us to sort of where we are now which is through the blog and our Blog Talk Radio station, where we offer up information as well as opinion and interviews. We're able to pull in thought leaders and authors of new books and bring people together to share ideas and discuss the opportunities that are available within the procurement profession.
Jeanette approached me about writing Supply Market Intelligence for Procurement Professionals because she and I, our experiences kind of complement each other. She is purely a research professional that has chosen to specialize in procurement and I'm more of a procurement professional at this point was sort of a thread of research of supply market intelligence running through my background. And so we were able to bring those perspectives together to create this book that not only allows us to say this is what supply market intelligence is and the value proposition associated with it, as well as how to put a program in place and how to execute. But then to collect all of the information resources which form the second half of the book to say okay, now that you've got the process in place and you understand what the potential that’s at stake is, where do you go to start collecting this information?
About Kelly Barner
Greater Boston AreaInformation Services