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Detailed Category Management Information

We all have often looked over the fundamental info and data to which Category Managers have to have access. e.g. spend by service provider, category, small business unit etc. (see the standard model we’ve built further down.) For the reason that we have said, this information is normally much less readily obtainable as would be preferred. Category management professionals can be found tearing their hair out wrestling along with over-worked or under prepared paperwork of many differing types in order to find the info they must have to complete a complete picture of the categories state of affairs.

Today we are turning our attention towards a 2nd tier regarding category knowledge that has in no way been documented or codified as far as we’ve been informed. Tier 2 is a lot more specialised data which will differ depending on the profile of the particular category and the potential value which is achieved simply by building on the information and understanding out of Tier One. This gives undeniably leading edge information and category strategies that will fully connect with the business. Browse here at the link geobotany izcvolqepycqwhpsc uncorrectly to compare where to study this thing.

The main importance of comitting to the extra effort is gained when negotiating with suppliers because the data obtained will give beneficial insight to prices as well as determine opportunities to go after a reduction and / or add value enough to provide a transformation to the relationship with the supplier also making management of them considerably easier.

Types of Tier 2 Category Specific Information

The Top Ten different types of information wanted by Category Managers:

1 Cost Breakdowns: Purchase Price Cost Analysis (PPCA – a different name for “cost breakdown” is considered the process of determining the primary elements that make-up any distinct cost from a supplier for their service (or product). Every suppliers price is divided in to its principal elements like the cost of raw materials and transportation and the like. When this is successfully done it is much easier to compare suppliers against each other. Obviously, this process also helps prevent making assumptions and helps to understand not only what makes up any particular cost but also exactly what drives it. One example is, where logistics could be a high % of the overall cost price then a rise in diesel prices will definitely impact on the overall cost.

2. Specification Mapping: Segmenting spend into categories and even sub-categories is usually enough when calculating probable savings. Part of the category strategy should go into significantly greater detail in order to find cost reduction opportunities and this needs to be designed as part of the process. This requires the assessment of the specific part numbers as well as services bought, determining the technical specifications and/or performance behind them and linking these to the relevant prices and volumes. Once completely finished, analysis of the results to determine value can be done. Do not ever disregard the smallest detail of any products or services, it may be one of the keys to the next opportunity to help reduce cost.

3. Finished Product Cross-fertilisation: This calls for an awareness of which sub-categories provided by a supplier are utilized in which end products sold to consumers and then making this visible to the supplier. This can be used to persuade suppliers to provide the best pricing and/or innovation, to allow them to feel instantly connected to business development with the end consumer and can influence the demand for their own products and services.

4. Benchmarking and Unit Value: Breaking up costs down to the individual unit assists you to establish a benchmark value. Spend is divided by a variable which is appropriate such as height or customer feedback. In this manner different suppliers are able to be evaluated against one another and differences acknowledged. The next task is to search for the factors behind the differences, eliminate any poor practices and share the excellent practices that may result in lower costs throughout the organisation. An illustration worth sharing is how the total cost for every retail store of marketing spend resulted in local accents being used in television advertising campaigns.

5 The Value of Operations Data: Selecting a alternative product or service which directly compares with the preceding one is easy to validate in terms of cost difference. Naturally, finding out pricing variations where a replacement product or service is not the same is much more difficult. That’s where the overlay of operations knowledge may make it possible for a total cost of ownership (TCO) assessment to take place and many more challenging potential opportunities and associated cost differences validated. For example, these types of total cost opportunity scenarios can take place when a completely new compound is used that’s twice as successful as the previous one, or when a new motor oil filter for a vehicle is claimed to last x miles further before buying a replacement, compared to the current filtration system.

Modelling Knowledge in Procurement

In every case category managers should give some thought to which value levers are likely to generate completely new opportunities for the purpose of getting additional benefits and which types of ‘Procurement Ready’ information will help discover and quantify these potential opportunities.

The Supply Chain Footprint:

This involves mapping 1st level vendors and finding the geographic locations from which they supply your company. The next phase is to map other levels of the supply chain and linked manufacturing locations. This knowledge of vendors and production locations in the supply chain enables supply risk (e.g. assurance of supply), reputation risk ( e.g. suppliers CSR practices) and commercial risks (e.g. switching costs) to be revealed and then managed.

6. Revenue & Profitability Overlays: Discovering areas where purchasing people will be able to improve cost prices and/or sales revenue through the course of category reviews is recommened practice. The focus is now on the combined costs of finished products or services. Cross-functional teams can then get the job done collaboratively either to identify probable cost reduction opportunities or retain the guarantee of high revenue sales. One of the biggest benefits however by working across most categories is that many more opportunities are exposed to the category purchasing people.

7. The Suppliers View on Data Measuring the supplier relationship can be carried out both internally in the company but also, even more importantly by the suppliers theirselves. This process can identify where things are going both well and not so well. It can help to identify how important the organization is as a customer to the supplier. Questions to ask will include: Are the procedures aligned correctly? Is the relationship with the supplier working effectively? Is the business relationship properly delivering the benefits necessary for the organisation? Have any opportunities not been identified? By having these details easy to get at and plainly linked to the relevant categories, improvement opportunities can be made visible, integrated throughout category strategies and implemented.

8 Market Data Overlay: Marketplace data that include energy costs, metals costs, chemical costs, labor costs etc. really should be made available to relevant procurement team members. Keeping track of all changes in vital areas like these is essential for both price reduction opportunities and also for the good of the suppliers profitability.

9 Consumption Profile Anywhere seasonal demand profiles exist they must be prepared for and analysed. When mapping this demand profile and consequently thinking about its effect on certain suppliers, more information should be shared with them, more robust relationships developed and more strategic negotiations started.

Next Steps and Insights:

You may at this point like to have a look at the Knowledge Hub run by Future Purchasing Procurement Consultancy. that has a great deal of related information.

With a high quality “Procurement Ready” knowledge base, establishing a solid category strategy is quicker and easier. As a result this builds increased momentum for procurement transformation. Investing in this methodology is regarded as a characteristic of the leading category management exponents and frequently can lead to in excess of 45% more savings compared to those where the approach is less demanding.

Making sure that every one of the category managers adhere to the exact same approach is a must and so the method should be mapped to ensure uniformity.

The foremost forward thinking businesses have champions of this technique whose role it is to make sure the procurement knowledge database is always up to date — releasing category managers to concentrate on developing superior category strategies, more quickly.

Prioritising the need for a Knowledge base is fundamental to achieving success and must be designed and prioritised in order to improve ways of working.

Making category management a core business competence of modern procurement departments is a high priority.

Multi-site businesses in the private sector and large government departments inside the public sector must have “one way of working” effective at unlocking value in a quick and versatile way. Using a ‘Procurement Ready’ strategy is an integral basis to deliver outstanding value more quickly. Selecting the right procurement consultant to help you through the entire process is generally the most effective way to go and circumventing a variety of hurdles out there..

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