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During the Research phase of your initiative, you are taking your preliminary ideas, adding context to them (gained through Data Collection and Spend Analysis), and converting them into a final sourcing strategy. To accomplish this, you need to gain a broad understanding of the category you're sourcing. This sounds like a simple concept, but many professionals don't take time to understand the nuances of the categories they're sourcing. Many rely instead on documentation provided by their predecessors, “legacy processes.”

Relying on previous work alone is potentially dangerous for several reasons. First, suppliers can easily pick up on your lack of understanding and insight into the spend category. If they know you're not familiar with the market, they may offer higher‐than‐average prices—and they'll probably get away with it.

Second, without some market you may not be able to successfully identify all the suppliers in the marketplace, or you may overlook the right types of suppliers. We review types of suppliers in greater detail later in the chapter, but for now, a simple example would be a manufacturer versus a distributor. Currently, you may buy all your copy paper through a distributor, such as Staples. However, if the volume of paper you consume is great enough and your organization has the inventorying capabilities, it may make more sense to contract directly with a paper manufacturer and purchase paper by the truckload. Without a firm understanding of the market, you may overlook this type of opportunity.

Third, a lack of market insight inclines you toward mimicking the methods and obtaining the results of whoever sourced the category before you. Without the Research phase, you may feel tempted to consult the documentation, employ the methods, and seek the results available to you. This ignores, however, that markets are fluid, changing constantly. New technologies, new products, or new competitors may have emerged since the last time you sourced categories related to the product. Alternative processes, sourcing tools, or services may be available that have not been considered before. Without market research, these opportunities can easily be overlooked.

Each spend category necessitates a different type and amount of research. However, you should explore some general elements during the Research phase of any Strategic Sourcing initiative:

 Identifying suppliers

 Understanding supply chains

 Understanding market conditions

 Understanding the factors of cost

 Reviewing available technologies

 Reviewing alternative processes

 Reviewing alternative products and services

 Performing a want‐versus‐need assessment