Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy
Sourcing Market Research — Definition + 5 Powerful Strategies
As taught in the Annual Procurement Strategy Course / ★★★★★ 4.9 rating
What is sourcing market research?
- Sourcing market research refers to the process of gathering data to identify suitable suppliers and products.
- Sourcing market research provides procurement with essential insights into trends, data storage, and consumer demand.
- Sourcing market research is essential for optimizing procurement to ensure quality, cost-efficiency, and supplier reliability.
What is Sourcing Market Research?
Sourcing market research is a structured process of collecting and analyzing information about the supplier market to support sourcing decisions. It clarifies who can supply, under what commercial and operational conditions, and how market dynamics influence price, lead times, quality, and availability. In procurement, it is used to reduce uncertainty before deciding on the sourcing strategy and going to tender or negotiation.
The purpose of sourcing market research is to turn market data into actionable insights that shape supplier selection and the sourcing approach. It typically examines cost and price drivers, supplier capabilities and capacity, competitive intensity, and key risks such as disruption exposure, regulatory constraints, and financial stability. The outcome is a defensible sourcing strategy that balances cost, value, and security of supply.
The 5 Powerful Strategies of Sourcing Market Research
Sourcing comes first because you can’t buy what you can’t reliably source. That’s why companies use structured market research to identify dependable suppliers, especially in indirect procurement.
1. Product Research
You’ve probably heard of product research over and over again. Well, we’re incredibly sorry, but you’ll just have to bear with it because, in the procurement process, product research happens to be very important.
If you’re going to buy a product, then you need to understand the product. This is a sort of golden rule among procurement managers. Market research is essential to success; without it, you run the risk of buying products that will not sell at all.
Remember, when doing product research, always look at the following:
- Trends – Always look at trends in the product category and look at how companies deal with the trends.
- Store Data – When you look at specific stores, what do the numbers tell you? Are the products interesting enough to keep the store afloat?
- Consumer Demand – Finally, check if the products are in high demand. Have a look at what the consumers are asking for. Make sure to get all the data available.
Example
A procurement team at a retail chain plans to source private-label stainless steel water bottles for the summer season. They analyze category trends (rising demand for insulated bottles), check store and online sales data for similar SKUs, and review competitor pricing and feature sets. They also track consumer demand signals such as search trends, reviews, and common complaints (leaks, paint chipping, poor insulation). Based on the findings, they define a target spec (e.g., 750 ml, double-wall insulation, leak-proof cap) and a realistic target cost range before contacting suppliers.
2. Asking for Product Samples
Are you one of those procurement specialists who dislike asking for samples? Well, we at Procurement Tactics are about to tell you to stop being a wuss and actually ask your sourcing prospects for samples!
The best procurement manager is one who knows the advantage of asking for samples. This way, you and your procurement team can have a closer look at the product. After testing it, gather with your team and discuss your findings.
You can also take the samples to your team and have them test them out and look for anything weird or strange with the product. If you have a dedicated team that looks into these things, then even better. Carefully record everything observed with the samples.
Example
A facilities procurement team is selecting a new industrial cleaning chemical for warehouses and requests samples from three shortlisted suppliers. They run a controlled test on the same surfaces and soil types, using identical dilution ratios and cleaning procedures. The team records measurable outcomes like cleaning time, residue, smell intensity, safety handling needs, and any material compatibility issues. They also collect feedback from operators who will use it daily, because usability and safety can be as important as performance.
3. Giving an Evaluation
After the samples and trial run, it’s time for the procurement manager and his/her team to give their evaluation.
Whether or not the company chooses to move forward with the supplier, giving an evaluation is something that both the procurement team and the supplier can appreciate. Check to see if the product achieved the goals you’ve set. Did the product overperform or underperform? How was the product received in stores?
Also, evaluate how well the procurement team communicated with the supplier.
- Did the products arrive on time? Were there any problems with the delivery?
- Were concerns addressed by both teams without any further issues?
- Were the products in good condition when they arrived?
The following evaluations will give you and your team ideas of how to move forward with product sourcing. Never hesitate to evaluate all suppliers after the production run.
Example
After a 6-week pilot with a new packaging supplier, the procurement team conducts a structured evaluation meeting. They compare pilot results against the goals: damage rate, on-time delivery, packaging consistency, and cost per shipped unit. They also review communication quality, response time, how issues were escalated, and whether corrective actions were implemented quickly. The final evaluation is documented and shared with the supplier, including clear next steps such as approval, conditional approval with improvements, or removal from the shortlist.
4. Supplier Landscape Mapping
Before you request samples or start a trial, you need a clear picture of the supply market, who the real suppliers are, how many credible alternatives exist, and how concentrated the market is. This strategy helps you avoid “false options” (brokers, weak distributors, or suppliers without capacity) and focus only on suppliers that can actually meet your requirements. It also helps you spot leverage points early, like oversupply, new entrants, or suppliers competing for the same demand.
Remember, when mapping the supplier landscape, always look at the following:
- Supplier tiers – manufacturer vs distributor vs agent, and who controls capacity
- Market concentration – many qualified suppliers vs a few dominant players
- Capability and capacity – technical fit, volumes, lead times, and constraints
Example
A manufacturer needs a new source for injection-molded plastic components and starts by mapping the supplier landscape across the region. They separate suppliers by tier (OEM molders, contract manufacturers, distributors) and identify who truly controls tooling and capacity. Next, they assess market concentration to understand whether there are many qualified suppliers or only a few with the required certifications and equipment. With this map, they prioritize suppliers with proven technical capability, available production slots, and reliable lead times, while filtering out brokers who cannot guarantee capacity.
5. Total Cost of Ownership Screening
A product can look good in samples and still be a bad sourcing choice if it creates hidden costs after purchase. Total Cost of Ownership (TCO) screening expands research beyond unit price to include logistics, quality failures, downtime, service needs, and administrative workload. This strategy helps procurement pick suppliers that deliver the best overall value, not just the cheapest quote.
Remember, when doing TCO screening, always look at the following:
- Logistics and handling costs – freight, packaging, storage, and damage risk
- Quality cost – defects, returns, rework, warranty claims, and inspection effort
- Operational impact – installation effort, maintenance needs, lead-time reliability, and disruption risk
Example
A company is choosing between two suppliers for conveyor rollers, where one offers a lower unit price but longer lead times and weaker warranty terms. The procurement team builds a simple TCO view that includes freight, packaging, expected defect rates, inspection time, downtime risk, and maintenance frequency. They also factor in operational impact: how quickly spare parts can be delivered and how disruptions would affect throughput in peak weeks. The analysis shows the slightly higher-priced supplier reduces total costs by lowering failures and avoiding production stoppages, making it the better overall value.
Conclusion
Sourcing market research turns supplier-market data into clear decisions by showing who can reliably supply, what the true cost and risk drivers are, and how market dynamics affect price, lead time, and availability.
By combining product understanding, sample testing, structured evaluations, supplier landscape mapping, and TCO screening, procurement reduces uncertainty and avoids “cheap but risky” choices. The result is a sourcing strategy that is defensible, realistic, and aligned with both performance needs and security of supply. Done well, it strengthens negotiation readiness and improves long-term supplier outcomes.
I have created a free-to-download supplier questionnaire template. It includes a PDF file that contains the questions that you can ask your suppliers to assess them effectively, if they are the best partners for your procurement process.
Frequentlyasked questions
What is sourcing market research?
Sourcing market research is the process of gathering data to identify suitable suppliers and products.
Why does sourcing market research matter?
Sourcing market research matters because effective sourcing of market research optimizes procurement, ensuring quality, cost-efficiency, and supplier reliability.
How does TCO screening work in sourcing market research?
Instead of comparing unit price only, you estimate the full cost over time (logistics, quality issues, downtime, and service). This often shows that the “more expensive” supplier on paper is cheaper in real operations.
About the author
My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.
