Supplying Principles and Practices > USPS Supplying Practices Process Step 1: Identify Needs > Conduct Market Research and Benchmarking Analysis

Conduct Market Research and Benchmarking Analysis

Market Research

Market research is the continuous process of gathering data on product and service characteristics, suppliers' capabilities, and the business practices that surround the purchase and use of products and services. Market research is an essential component in the determination of whether to acquire or manufacture a product or service and can be used to:

• Determine elements of requirements

• Evaluate price realism and cost realism

• Shape the commodity strategy

• Develop the support strategy, the terms and conditions included in the contract, and the proposal evaluation factors used for source selection

• Evaluate innovations/trends in the market that will offer savings or impact total cost of ownership (TCO)

Market research and benchmarking analysis differ from issuing and analyzing responses to a Request for Information (RFI), which is covered in the Develop, Issue, and Analyze Responses from Request for Information (RFI) topic in Process Step 1: Identify Needs. There are two types of market research: primary and secondary. Primary research attempts to collect original information, usually through focus groups, surveys, field tests, interviews, or observation, and provides a direct understanding of the target market. Secondary research leverages previously collected information, often in the form of demographic information, prior surveys completed by others, industry trade information, reports and studies, publications, and other preexisting media. Primary research allows the organization to customize the study, but is also more complex, time consuming, and expensive than secondary research. Secondary research requires fewer resources than primary research; however, it tends to produce generalized results. An accurate analysis of the target market often requires use of both methods. Figure 1.6 provides sample market research activities and their intended purpose.

Figure 1.6

Sample Market Research Activities

Benchmarking Analysis

Benchmarking Analysis is a specific type of market research that allows organizations to compare their existing performance against others and adopt improvements that fit their overall approach to continuous improvement and culture.

Many types of benchmarking exist; the most commonly recognized are:

• Process - evaluates specific business processes (e.g., purchase planning, e-procurement, service delivery). Process maps are used to facilitate benchmarking.

• Performance - compares product and service as a way to assess the organization's competitive position against same-sector peers. Focuses on costs, technical quality, ancillary service features, and performance characteristics (also called competitive benchmarking).

• Strategic - seeks to evaluate the organization's strategic maturity against others across various sectors. Focuses on general approach to the development and management of core competencies, innovations, and change strategies.

Benchmarking analyses often rely on both quantitative and qualitative measures to generate meaningful results. Quantitative analysis can provide metric-based outcomes, while qualitative comparisons often reveal best practices. The benchmarking process usually encompasses four steps:

1. Planning

2. Analysis

3. Action

4. Review

Step 1: Planning

• Determine the broad business process and tasks to benchmark

• Identify the resources required for the study

• Confirm the key activity performance measures or indicators

• Document the existing process for conducting the activity

• Identify appropriate reference models as a starting point for your assessment

Step 2: Analysis

• Collect information to identify the scope for improvement

• Compare the existing process with that of appropriate reference models to identify differences and innovations

• Agree on expected targets for improvement

Step 3: Action

• Communicate the results of the study to key stakeholders

• Develop an improvement plan to implement changes

• Implement the improvement plan, monitoring progress and reviewing as necessary

Step 4: Review

• Review performance when the changes have been implemented; identify and rectify bottlenecks

• Communicate the results of the implemented changes

• Schedule future benchmarking activities to continue the improvement process

Benchmarking Benefits

Organizations that successfully utilize benchmarking report that the associated costs are repaid at least tenfold. Benchmarking can be used to help identify not only which processes to improve but also the gaps between existing processes and the best practices of other organizations. It also supplements a number of performance improvement techniques, such as business analysis and the redesign of business processes.