The Benefits Of Doing Market Research Before Developing A Procurement Strategy
Before you can develop an effective procurement strategy or tender, it's important you understand the state of the market you're about to enter. Without this knowledge, the chances of not achieving the desired outcome, and instead just wasting time and money are greatly increased.
What does market research entail and why is it vital?
As Heath explained, it's about gaining ''a better understanding of what's available in the market prior to actually developing your procurement strategy and/or tender''. This understanding can come from a variety of places:
- Internet research on suppliers and their capabilities.
- Reaching out to similar organisations to see what they do to source a particular good or service.
- Industry research on specialist platforms such as IBISWorld to understand who the major players are, the services they offer and how the good or service is evolving with new technologies.
Undertaking this market research brings a host of benefits. Principally, it ensures that your procurement strategy as a whole aligns with the capabilities of the market; there's no point building a strategy around something the market can't actually deliver. Once you know what the market can do, Ryan explained, you can then tailor your procurement approach to achieve the best outcome.
''Market research helps you decide whether the solution you're looking for is best outsourced to the market, delivered internally or a combination of both. You can't really know which option is best until you've done your due diligence on what the supply capabilities of both the market and your own firm are,'' Ryan said.
Market research also provides a chance to consider alternative solutions, new innovations or opportunities for collaboration, if some parts of the market are ahead of the others. Heath provided an apt example: "New technology is changing so fast, so you don't want what you're procuring to be redundant within a year - there may be opportunities to future-proof that service by finding new and innovative suppliers, but you have to do your research first to find them.''
Finally, market research also provides the opportunity to find out the likely costs of the goods and services you're seeking, so you can determine whether a tender can be delivered within allocated budgets.
As important as it is, doing market research takes time and specialised knowledge. One of the services Procurement Co provides is doing this research for you.
What can happen if you don't do your research?
Ryan explained a number of negative consequences not doing the necessary market research can bring.
''If you run a tender without understanding the market, you can end up with an unexpected or unsuccessful outcome, resulting in wasted time and money.''
There's also potential for damage to your reputation ''if the tender's aborted because the strategy wasn't properly thought through, or you don't have adequate budget to procure the services tendered, it may reduce the markets likelihood of tendering for future work you release.''
Finally, as Heath pointed out, a lack of research can bring about lost opportunity costs: "You potentially miss out on a better service or improved pricing if you just roll over a similar strategy from last time you tendered to the same suppliers. For all you know, there could be ten new suppliers out there who do a better job at a better price, or can offer you something your current supplier doesn't. But unless you do the research and understand how the market has changed since last time you tendered, those opportunities will be lost.
To learn more about how the team at Procurement Co can help with your market research, get in touch with a member of the team today.