Oct 9, 2018

Posted by in Home | Comments Off

Specific Category Management Information

We have often looked over the essential information and data to which Category Managers need access. e.g. spend by service provider, category, small business unit etc. – there is a decent illustration mapped out listed below. As we have pointed out, this data is typically much less readily available as would be liked. Category management individuals can be heard pulling their hair out struggling with over-worked and also under prepared paperwork of numerous different types in order to find the information they need to complete a 100 % picture of the categories state of affairs.

This article seeks to identify an additional type of category data which is different and not identified somewhere else to the best of our knowledge. This kind of 2nd level information is of a granular kind and will vary considerably between categories notably when even the most basic questions haven’t already been addressed. This provides you with truly innovative insight and category strategies which will fully connect with the organisation.

In many cases this results in more intelligent negotiations, much better cost control, more capture of company innovation and also pinpoints additional options available for value growth.

10 ways Purchasing People utilize category information

We have identified 10 kinds of Tier Two category specific data:

1 Cost Breakdowns: Cost breakdown or PPCA action figures out the principle cost factors that are incurred by the supplier supplying services or products. Each suppliers price is divided in to its main constituents for example, the cost of raw materials as well as transportation etc. When that is successfully done it’s easier to compare and contrast suppliers against one another. Cost breakdowns of course build greater knowledge of underlying cost drivers which includes technical specifications, manufacturing methods plus service delivery operations for example.

2. Specification Mapping: Segmenting spend in to different categories and sub-categories is enough when calculating prospective cost savings. Part of the category strategy should go into greater detail in order to find cost reduction opportunity and this ought to be planned as part of the process. A considerable amount of analysis is necessary to achieve this. It needs to get in to the smallest detail of a constituent part of a product or a service because they could be the main drivers driving the cost price. This information will make it possible for detailed Value Analysis activity to be carried out. For instance, this can be linked to the overall performance specification for part numbers of electronic components, departure times for identified air travel sectors, or even the addresses of high street network branches getting alarm system reactive support.

3. Finished Product Cross-fertilisation: This requires an understanding of which sub-categories supplied by a supplier are being used in which end products provided to customers and then making this visible to the supplier. On the list of plus sides of this for the supplier is that they are considerably closer to the thinking of the customer. This might be convincing when negotiating a better cost price.

4 Unitisation & Benchmarking: Breaking up costs down to the individual unit helps set a benchmark value. Spend is divided up by a variable that’s appropriate such as height or even customer feedback. In this manner different suppliers can be assessed alongside each other and difference identified. The next thing is to discover the factors behind the variances, eliminate any bad practices and talk about the excellent practices which usually contribute to lower prices across the business. An example worth sharing is how the total cost per retail store of marketing spend led to local accents being used in radio ads.

5. Discover further about geobotany izcvolqepycqwhpsc uncorrectly by visiting our dazzling encyclopedia. The Value of Operations Data: Cost variations relating to alternative products or services that are exactly like the original item are almost always simple to measure. However, where the alternate provides a completely different predicted general performance, the verification associated with a cost variation may appear far more challenging. This is where the overlay of operations information could very well enable a total cost of ownership (TCO) analysis to take place and even more challenging potential opportunities and associated cost differences validated. For instance, these types of total cost opportunity situations can occur when a new compound is used that is twice as effective as the former one, or where the modern oil filter for a motor vehicle is claimed to last x miles further before replacing, compared with the present filter.

Modelling Knowledge in Procurement

In every case category managers will need to start thinking about which value levers can potentially provide brand new business opportunities for the purpose of gaining more benefits and which kinds of ‘Procurement Ready’ information will help identify and then quantify these potential opportunities.

The Supply Chain Footprint:

This involves mapping 1st level suppliers and also pinpointing the geographic regions from where they supply the organization. The next task is to map further layers of the supply chain and affiliated manufacturing facilities. This knowledge of vendors and also production addresses in the supply chain enables supply risk (e.g. assurance of supply), reputation risk ( e.g. vendors CSR practices) and commercial risks (e.g. switching costs) to be identified and controlled.

6. Overlaying Profitability and Revenue: When looking at end product sales revenue and productivity overlays you are able to discover target areas where purchasing activities can be used to help support or boost existing levels of income and profit margin. Rather than concentrating on the price of specific part numbers or sub-categories, the cost of these are grouped together around a customer end product or service. Cross-functional groups can then work collaboratively to either determine potential cost reduction opportunities or support the guarantee of higher revenue sales. One of the greatest advantages however by working across most categories is usually that more opportunities are exposed to the category purchasing people.

7. Supplier Perception Data: Measuring the supplier relationship can be done both internally in the business but also, most importantly by the suppliers theirselves. It identifies instances of weakness and also potential areas for improvement in relationship quality. The additional benefit of learning how essential the organization is to the supplier may also be identified. Normal matters asked about include: How well do the tactical agendas of both parties align? Is the relationship with the supplier functioning effectively? Is the business relationship appropriately supplying the benefits necessary for the organisation? Have any potential opportunities not been identified? If you have this data easy to get at and also clearly linked to the appropriate categories, development opportunities can be made visible, integrated inside category strategies and executed.

8 Market Data Overlay: Bypassing key industry data including commodity prices would likely clearly be a error in judgment. This could be mainly because the business is directly buying the thing in question, or maybe it is a key component of a supplier’s cost base and the organisation ought to keep track of changes in the cost base.

9 Consumption Profile Where seasonal demand profiles can be found they have to be planned for and analysed. This empathic methodology with suppliers helps your SRM (Supplier Relationship Management) as their requirements are better understood and prepared for.

Summary & Recommendations for Action:

You may at this stage wish to have a look at the Knowledge Hub run by Future Purchasing Procurement Consultancy. that has a wealth of help and advice.

The very best category managers will create a strategy based on a sound procurement understanding. They will certainly get it done with less difficulty and the strategy needn’t be hard for them. The prospect of successful transformation programmes are improved as a result. A ‘Procurement Ready’ base of knowledge is one of the differentiators between Category Management Business leaders and Followers and contributes to the 46% additional cost savings which Front runners enjoy compared to Followers.

In order to use a “Procurement Ready” base of knowledge our recommendation is that a consistent method is produced and also properly trained so that a vocabulary is established across the procurement team.

The most forward thinking businesses have champions of this process whose duty it is to make sure that the procurement knowledge database is constantly up-to-date ,freeing up the category management team to make use of the information for their strategic thinking.

Prioritising the requirement for a Knowledge base is fundamental to being successful and must be planned and prioritised in order to really transform ways of working.

Neglecting Category Management in modern-day procurement teams is not an option and should get prioritised.

Both public and private sector businesses should supply procurement kpi’s efficiently and in the right way. Implementing a ‘Procurement Ready’ strategy is a vital building block to generate outstanding value faster. A good procurement consultant will be helpful in saving time, energy and money when beginning this type of journey and it is highly recommended..

Comments are closed.