Welcome to Gaia! :: View User's Journal | Gaia Journals

Essential Know-how in Category Management - the specifics for Procurement Employees

We have frequently considered the fundamental resources and data to which Category Managers need to have access. e.g. spend by supplier, category, business unit etc. -- there's a decent example of this mapped out listed below. For the reason that we have said, this information is normally significantly less readily obtainable as would be liked. Category management experts can be found tearing their hair out struggling along with overworked or under prepared paperwork of countless differing types to find the information they will need to complete a full picture of the categories state of affairs.

Right now we are turning the attention to a second level of category data that has not ever been documented or codified as far as we've been aware. Tier Two is much more specialist data which will differ according to the profile of the category and also the potential value which is achieved by building on the information and understanding from Tier One. This provides genuinely advanced understanding and category strategies that will fully connect with the organisation.

The main importance of comitting to the extra efforts are gained whenever negotiating with suppliers because the data obtained gives valuable insight to costs and determine the opportunity to pursue a reduction and / or add value enough to provide a transformation to the relationship with the supplier also making management of them much less complicated.

Types of Tier 2 Category Specific Information

Category Management data - 10 fundamental gaps it is crucial to fill:

1 Cost Breakdowns: Cost breakdown or PPCA activity figures out the primary cost factors that are incurred by the supplier providing services or products. By estimating the % split of the supplier’s total price that's going to be attributable to each and every cost component, side by side somparisons can be done across suppliers. Obviously, using this method potentially helps prevent making assumptions and helps to understand not only what makes up any particular price but also exactly what drives it. For example, where logistics is a really high percentage of the total cost price then a increase in oil prices will definitely affect the total cost.

2 Understanding Specifications: Segmenting spend down into different categories and even sub-categories will be enough whenever calculating probable savings. A part of the category strategy should go in to significantly greater depth in order to find cost reduction opportunity which should be scheduled as part of the whole process. A large amount of analysis is needed to do this. It has to get into the smallest details of the constituent part of a product or a service as these might be the principal drivers behind the cost price. When completely finished, analysis of the results to establish value can be done. Don't ever overlook the tiniest detail of your product or service, it may be one of the keys to a new opportunity to minimize cost.

3. Finished Product Cross-fertilisation: To appreciate specifically what products connect to other sorts of products (or services) used by end consumers the suppliers sub-categories have to be matched up with the end product. Use this to motivate suppliers to give best prices and/or new developments, to allow them to feel instantly connected with business development with the end consumer and can have an impact on demand for their own products and services.

4. Benchmarking and Unit Value: Unitisation is when spend data is divided by a suitable variable such as area, length, customer satisfaction etc. This enables benchmarking across diverse suppliers or parts of an organisation, to ensure that variances in general performance are often identified. Cost reduction takes place when good habits are recognised and shared whilst undesirable practices are removed or re-engineered. One example of this approach used by ourselves, was the analysis of unitised total FM costs in every square metre throughout 80 depots for a UK bus business.

5. The Value of Operations Data: Pricing differences between alternative products or services which are exactly like the original item are straightforward to measure. Obviously, finding out price variations when a substitute product or service is different is far more challenging. Analysing the total cost of ownership can be done with the use of operations data files which as well as verifying cost variations might also realise far more potential opportunities. A example of these benefits includes circumstances such as when a electric battery is identified as lasting longer compared to the old one or where the brand new ingredient boosts shelf-life by 20% extra.



6 Overlaying Profitability and Revenue: Discovering areas where purchasing teams are able to improve cost prices and/or sales revenue over the course of category reviews is recommened practice. Dig up new info on supply chain consultant discussions by visiting our original article directory. Rather than concentrating on the price of specific part numbers or sub-categories, the cost of these are grouped together around a consumer end product or service. At this time people from various other business units are usually crucial in helping to authenticate opportunities to help reduce price. By working in this way, cross category possibilities can also be discovered which might not have already been identified when following individual category centred way of working.

7 The Suppliers View on Data This is structured qualitative feed back coming from suppliers and internal stakeholders on the current state of a relationship. It discovers areas of weakness and also potential areas for development when it comes to relationship quality. The additional benefit of learning how vital the business is to the supplier can also be discovered. Questions to ask will include: How well do the strategic agendas of both sides align? How effectively does the relationship work? Is the relationship appropriately delivering the benefits required by the business? Have any potential opportunities not been acknowledged? With this information easy to get to and also clearly linked to the appropriate categories, improvement opportunities can be made visible, incorporated inside category strategies and put into practice.

8. Market Data Overlay: Industry data that include utility costs, metals prices, chemical prices, labour rates etc. should be made available to appropriate procurement team members. To read more, consider checking out: category management consulting . This might be simply because the business is directly buying the thing in question, or perhaps it's a key component of a supplier’s cost base and the organisation needs to monitor changes in the cost base.

9. The Profile of Consumption: This is helpful to understand if the business has got an end customer demand profile which isn't flat, and varies throughout the year. By mapping the demand profile and consequently thinking about its effect on particular suppliers, more details could be given to them, much better business relationships produced and more strategic discussions started.

Next Steps and Insights:

You might at this point want to have a look at the Knowledge Hub operated by Future Purchasing Procurement Consultants. which has a great deal of insight.

Using a higher quality “Procurement Ready” knowledge base, creating a robust category strategy is quicker and easier. Visiting per your request seemingly provides suggestions you can use with your co-worker. As a result this generates increased momentum for procurement transformation. A ‘Procurement Ready’ knowledge base is one of the differentiators between Category Management Front runners and Followers and contributes to the 46% extra cost savings that Front runners enjoy compared to Followers.

To be able to use a “Procurement Ready” knowledge base we recommend that a consistent method is designed and then coached to make certain that a vocabulary is established throughout the procurement team.

A further enhancement we come across, from the leading organisations, is to set up a specialist function within the procurement team that specialises in producing this data ,liberating the category management team to make use of the information in their strategic thinking.

Prioritising the need for a Knowledge base is fundamental to success and has to be designed and prioritised so that they can really transform ways of working.

Overlooking Category Management in present day purchasing teams is no longer an option and should be prioritised.

Multi-site companies in the private sector and large gov departments inside the public sector demand “one method of working” effective at unlocking value in a fast and flexible way. Developing a ‘Procurement Ready’ strategy is an essential building block to provide outstanding value faster. A good procurement consultant will be beneficial in saving time, energy and money when embarking on this type of journey and is strongly recommended..