Académique Documents
Professionnel Documents
Culture Documents
White Paper
Devaraj Chithur
Devaraj is part of the Supply Chain group within Tata Consultancy Services (TCS) and a
business process services (BPS) solution architect in presales and solutions. Prior to this
role, he was Director, Global Procurement and held leadership positions in delivery
functions across global sourcing, procurement, and planning and across supply chain
processes in various capacities for over twenty nine years. He holds an MBA, a masters in
Biological Sciences, a diploma in Foreign Trade, and is a Certified Professional in Supply
Management (CPSM). He has guided several Six Sigma projects and is a cited author in
industry publications.
It is important for Chief Procurement Officers (CPOs) and category managers to focus on
developing a category strategy for optimized procurement results. Research that collates and
analyzes data, and provides targeted reports can support this strategy formulation.
One valuable area for such research is supply market intelligence (SMI). Supply market
intelligence is key to strategic sourcing. Clear and actionable reporting of supply market
analysis is essential for developing robust category strategies and achieving year on year
savings on high value spend categories. To enable this, companies require a significant
investment of resources with adequate domain expertise.
With access to high quality supply market intelligence (SMI), organizations can overcome
both the challenges of supply chain disruptions as well as achieving savings every year, with
up-to-date supply market visibility. Organizations can partner with supply market
intelligence service providers who offer IT tools to help gather SMI at an optimal cost.
Market analysts can leverage technology and tools to enable organizations to gather market
intelligence that can provide insights into core aspects of demand and supply trends,
commodity pricing structures, global capacity, and government and regulatory changes that
impact global sourcing. This understanding can help transform an organizations supply
chain for improved business results.
Contents
1. Introduction
9
10
11
1. Introduction
Organizations are focusing on consolidating their vendor base while simultaneously negotiating cost reductions
with suppliers. While companies are increasingly facing the challenge of supply disruptions, Chief Procurement
Officers (CPOs) and procurement specialists are expected to achieve savings year on year. Large organizations
harmonize and consolidate procurement processes and technology across business units, and group companies to
overcome these challenges and achieve savings from category sourcing projects.
The information challenges faced by procurement specialists are enormous. Collection and analysis of superior
market data is difficult and time consuming. As a result, there is a lack of market-linked, updated benchmarks on
prices. Sourcing intelligence is typically people dependent, and therefore, organizations lack guidance on how and
where to source categories. As organizations increasingly seek to build sourcing strategies that target cost savings
and competitive advantage, they must overcome the major challenge of obtaining better quality data for supply
market intelligence.
Category Analysis
including production
process of downstream
and upstream industries
Price Analysis
of each category and
price projections across
the value chain
Industry associations
Suppliers websites
Online literature
Qualitative analysis such as capacity utilization, economic impact, and impact of currency fluctuations
Low
Low
High
This analysis may not be necessary for low value goods and services or those that can be procured from many sources
and are easy to secure. High quality SMI will have a significant impact with respect to purchase of goods and services
when the spend value is high, and these products are difficult to purchase due to complex technology, or limited
suppliers. There may also be goods and services which may not be of high spend value, but are critical to the ongoing
business. Any supply disruptions could lead to production disruption, and hence, loss result in to the company. In both
these situations, extensive supply market analysis is extremely important.
Requests for SMI may occur in the following situations:
When category managers seek a new source for a specific category or are required to source a new product or service
For internal business requirements that require analysis of spend data, production levels, customer spending
trends, market pricing, and competitor actions
To mitigate supplier financial risks and ensure continuity by assessing major suppliers, related risk information, and
their specific risk monitoring assessments
The procurement challenge: CPOs of large organizations face the challenge of ensuring cost savings year on year.
This approach to strategic sourcing has a major limitation. In most companies, the sourcing process usually takes place
in a vacuum, with no detailed supply market assessment. Hence, the most important sub process is generating Supply
Market Intelligence. If this sub process is well executed, organizations can achieve sustainable cost savings every year.
Huge volumes of data are available for mining intelligence from various sources.
Online literature is the largest source of information, but the authenticity and validity of all online sources
cannot be guaranteed.
While generic information may be acquired freely from the public domain, specific and validated information
often requires a specialist intelligence provider, and such services may not be affordable for all companies.
Professionals capable of carrying out the research and analysis necessary for SMI are not easy to train, hire or
retain.
Deliver high impact knowledge processing at a competitive cost, and optimize the cost of collecting market data
while maintaining its quality
Leverage experience and expertise of service providers in multiple functional areas of SMI, like program
management, process documentation, review, design and operating effectiveness
Draw upon technology tools and techniques to achieve faster and better quality inputs, which enable
development of more efficient categories
Adopt global best practices to ensure quality and year on year savings
Focus on sourcing decisions, rather than spending effort on collecting supply market data
In the first phase, organizations can leverage their partnerships to gain better intelligence on high spend goods
and services (both direct and indirect materials). This helps to evaluate potential and existing suppliers or to look at
categories that are low value spends but are difficult to secure.
In the second phase, appropriate technological tools can be deployed to persistently monitor global suppliers
across multiple risk categories.
9
In the third phase, advanced activities such as performing searches on an existing or new strategic supplier or
vendor can be taken up. This may involve searching across large volumes of data to get comprehensive and relevant
market information. The data may include business information from both paid and unpaid sources.
All of the above activities enable companies to forecast and manage supplier risks, reduce supply disruptions and
ensure supply continuity, help in preventing possible lawsuits, and safeguard the companys reputation, besides
achieving cost savings.
Reports
Content
Category Market news, analysis & reports
Validated & researched supplier list
Commodity price indices
Centralized Sourcing best practices
RFX repository
TYPICAL COST BREAK DOWN
Service providers typically offer a wide range of strategies and solutions that are highly adjusted to different
types of categories, spend value, as well as regions. In addition to this, they can assist firms with decisions such
as determining the type of sourcing event. Such an arrangement can bring improved visibility through reporting
and predictable delivery through service level commitments on turnaround time and quality. As a result,
businesses can ensure seamless alignment between strategy goals and execution.
B) End-to-end sourcing and procurement services: A strong end-to-end, source-to-contract and procure-to-pay
methodology includes supply market analysis, category strategy development, global sourcing, requisition
management, RFX management, negotiations, contract and purchase order management, and supplier
performance management. This end-to-end service should be supported by software applications that make
the process flow seamless.
Supply market analysis is a critical sub process, which drives high savings as well as operational procurement
excellence.
5. Conclusion
High quality supply market information can help procurement professionals closely monitor their key suppliers and
utilize market intelligence to manage supply chain risks more effectively. It is essential for CPOs to gather insights
into industries, sectors, market niches, clusters and suppliers. Knowing what suppliers, competitors and customers
are expecting helps stakeholders devise appropriate strategies to achieve sustainable savings. The fastest and the
most cost effective route to enable this is to partner with service providers who can provide supply market
intelligence in an easily accessible manner using technology and tools along with customized reporting.
Information is the best weapon a CPO can wield, and whether the target is quality assurance or cost saving,
engaging specialized resources can procure the right information at the right time and the right cost.
11
Contact
For more information about TCS consulting services, contact bps.connect@tcs.com
IT Services
Business Solutions
Consulting
All content / information present here is the exclusive property of Tata Consultancy Services Limited (TCS). The content / information contained here is correct at
the time of publishing. No material from here may be copied, modified, reproduced, republished, uploaded, transmitted, posted or distributed in any form
without prior written permission from TCS. Unauthorized use of the content / information appearing here may violate copyright, trademark and other applicable
laws, and could result in criminal or civil penalties. Copyright 2014 Tata Consultancy Services Limited