Define Business Need: How to identify and define business need for an organization?

In a very simple word business need means the need of a business. Now the question can arise what is the need of any business. We need to understand this first.

Before going to the answer, let’s discuss first the mission or purpose of an organization.

Whether an organization operates in the public or private sector, it has a mission or purpose to achieve.

For a private sector organization this might be to supply a specific group of customers with products that meet their everyday needs or improve their lives in some way.

In this way, the organization’s goal to maximize its profits becomes possible and thereby provide a financial return to its valued shareholders.

On the other hand, public sector organizations are set up to provide people with services that are not available from the private sector or are better provided by a non-profit organization.

In either case, the mission of the organization will determine its business requirements. This in turn will affect what procurement needs to source and how it goes about it.

How to define business need and develop specification?

So, from the above discussion we understood in a nutshell, defining and identifying a need relates to having knowledge of what the customer requires.

As the purpose of any organization is to serve customers with either products or services in return to gain profit, so business organization must identify or understand what customer requirements are there to fulfill.

However, the customer can be internal or external.

For example, colleague from another department within a manufacturing organization, or the production department itself is internal customer.

External customers are those individual or organization that are separate entities to the buying organization.

These customers could be the end users or consumers or they could be a different part of the same supply chain.

Regardless of whether the customer is internal or external, being able to understand and define their need is critical to ensuring satisfaction.

However, a need can be tangible or intangible, or in other words, a product or a service.

The need is generated from the customers and communicated to the buyer. This is typically communicated in one of the three ways; verbally, via a paper requisition, or by electronic means.

Whichever method is used, the customer need should include details such as the following:

  • Description of what is required
  • Quantity of what is required
  • Delivery time and place of what is required
  • Quality of what is required

Within the description, there should be a specification. This could be either a simple or a complex document depending on the nature of the need.

Specification can relate to performance or conformance types.

Read more – difference between a performance and a conformance specification.

If the identified need is something that has been sourced and supplied previously, the buyer can simply refer to previous purchase orders for the full information.

In contrary, if the need is a new requirement, it is essential to provide information outlined the points above. Otherwise, the buyer may source and supply incorrect goods or services.

If the buyer has any doubts about what the need includes, they should liaise with the customer to ensure they have a full understanding.

This stage of the process may take a significance amount of time. The buyer may need to liase with colleagues many times for clarification on drawings, dimensions or quantities.

However, this stage is very important as it can either add value or incur costs if the wrong items or services are supplied.