Category Management Requirements for Purchasing Organizations

We’ve often looked over the fundamental info and knowledge to which Category Managers require access. examples include, supplier spend, category spend and individual business enterprise unit spend — there is a decent illustration mapped out in the following paragraphs. For the reason that we have said, this data is often not as readily available as might be preferred. Geobotany Izcvolqepycqwhpsc Uncorrectly contains further about the inner workings of this view. Category management experts are found pulling their hair out struggling along with over-worked and / or under prepared paperwork of numerous differing types in order to find the information they should have to complete a full picture of the categories situation.

Today we’re switching the focus to a 2nd level regarding category data that’s not ever been written about or codified as far as we’re aware. Tier 2 is much more specialist data that will differ depending on the profile of the category and also the potential value which might be achieved by simply building on the data and understanding out of Tier One. The effort to obtain this data however is definitely well worth it since the information obtained can be of a very high value.

In most cases this results in more informed negotiations on terms, improved cost control, greater capture of supplier innovation and also pinpoints more opportunities for value improvement.

10 ways Procurement People use category data

The Best 10 distinct types of information preferred by Category Managers:

1. Cost Breakdowns: Cost breakdown or PPCA activity figures out the main cost elements that are generally suffered by the supplier giving you a service or product. By calculating the Percentage split of the supplier’s total price that is likely to be attributable to every cost element, side by side somparisons can be made across suppliers. Obviously, this process potentially helps prevent making assumptions and will help to recognise not just what makes up any specific price but also exactly what drives it. One example is, wherever logistics is a really high percentage of the total cost price then a hike in oil prices will most likely impact the total price.

2 Understanding Technical specs: Segmenting spend into different categories and even sub-categories will be enough when estimating probable savings. However, when discovering opportunities during your development of a category strategy, it is necessary to review spend in more detail. This involves the assessment of the specific part numbers and / or services bought, determining the technical specifications and/or effectiveness behind them and connecting these to the relevant prices and volumes. Once successfully completed, analysis of the results to determine value is possible. For example, this could be linked to the performance specification for part numbers of electric components, departure times for identified air travel sectors, or the addresses of high-street network branches using security alarm reactive support.

3. End Product Linkage: This calls for an understanding of which sub-categories provided by a supplier are being used in which end products provided to customers and making this visible to the supplier. One of the plus sides of this for the supplier is that they are considerably closer to the thinking of the customer. This can be powerful when negotiating an improved cost price.

4 Unitisation & Benchmarking: Unitisation is where spend data is divided by a appropriate variable such as area, length, customer satisfaction etc. This allows benchmarking across different suppliers or parts of a business, to ensure variances in performance are often identified. The next step is to look for the causes of the differences, remove all poor practices and promote the good practices which usually contribute to lower costs throughout the business. An illustration well worth sharing is where the total cost for every retail store of marketing spend led to local accents being used for television ads.

5 The Value of Operations Data: Cost differences amongst replacement products or services which are identical to the very first item have always been simple to measure. Needless to say, figuring out pricing variations where the new product or service is not the same is more difficult. Reviewing the overall cost of ownership is possible with the aid of operations data files which in addition to validating cost differences may also realise additional opportunities. For example, these types of total cost opportunity scenarios can take place when a brand new additive is used that’s twice as beneficial as the original one, or where the new engine oil filtering system for a car or truck is claimed to be able to last x miles longer before replacing, compared with the present filtering system.

The ‘Procurement Ready’ Knowledge Model

In every case category managers will want to start thinking about which value levers will most likely produce brand new opportunities for the purpose of obtaining extra benefits and which types of ‘Procurement Ready’ knowledge will help discover and then quantify those potential opportunities.

The Supply Chain Footprint:

Plotting all your suppliers on a map in order to show their location is the 1st step to perform while creating a foot print. 1 step beyond this is to chart the address of lesser suppliers finally where products and services involved with the chain originate. Determining these particular addresses makes sure that major supply chain risks are able to be looked after this includes assurance of supply; reputation as well as, business oriented costs.

6. Revenue & Profitability Overlays: Finding areas where procurement people can improve cost prices and/or sales revenue throughout the course of category reviews is required practice. Instead of concentrating on the price of unique part numbers or sub-categories, the cost of these are grouped together around a consumer end product or service. Cross-functional groups may then do the job collaboratively either to establish probable cost reduction opportunities or retain the reassurance of high revenue sales. One of the greatest advantages however when working across most categories is that more potential opportunities are exposed to the category buying people.

7. The Suppliers View on Data This is structured qualitative responses coming from suppliers and also internal stakeholders concerning the current state of a relationship. It identifies instances of weakness and possible areas for improvement when it comes to relationship quality. The added benefit of learning how vital the organisation is to the supplier may also be discovered. Typical matters covered include things like: How well do the tactical activities of the two of you align? How effectively does the relationship function? How well are the organisation’s commercial needs currently being delivered through the business relationship? What development opportunities are available? Using this feedback and then accepting it is not always easy however category managers will find it very helpful when talking about strategy.

8 Market Data Overlay: Passing up key sector data such as futures trading prices would most likely clearly be a mistake. This could be because the organisation is directly buying the thing in question, or maybe it’s a key element of a supplier’s cost base and the organisation ought to keep track of a change in the cost base.

9. The Profile of Consumption: This is helpful to have an understanding of when the organization has got an end consumer demand profile which isn’t flat, but can vary during the year. This empathic methodology with suppliers aids your SRM (Supplier Relationship Management) as their particular demands are better understood and also planned for.

Summary & Recommendations for Action:

You might at this stage wish to investigate the Knowledge Hub run by Future Purchasing UK Procurement Consultancy. which has a great deal of help and advice.

The best category managers will produce a strategy based on a strong procurement knowledge. They will certainly make it happen more easily plus the approach is straightforward for them. The prospect of successful change programmes are raised as a result. Investing in this approach is known as a characteristic of top rated category management exponents and typically can lead to more than 45% additional cost savings compared to those where the approach is less demanding.

Making certain that all category managers stick to the exact same approach is a must so the process has to be mapped out to guarantee consistency.

The most forward thinking businesses have champions of this methodology whose duty it is to ensure that the procurement knowledge database is always updated ,liberating the category management team to use the information in their strategic thinking.

Prioritising the need for a Knowledge base is fundamental to achieving success and has to be planned and prioritised to be able to transform ways of working.

Making category management a key business competence of modern procurement teams should be a top priority.

Multi-site organisations from the private sector and large gov departments within the public sector demand “one way of working” capable of unlocking value in a very quick and flexible way. Adopting the process above will bring about an organizations step change in delivering value. Finding a procurement consultant that will help you throughout the process is often the best way to go and staying away from a variety of pitfalls out there..

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