Important Knowledge in Category Management — the specifics for Procurement Organizations

The most essential info and facts essential for professionals employed as Category Managers may have been documented countless times, examples include, supplier spend, category spend and individual business unit spend – there is a really good example of this mapped out below. As we have mentioned, this information is frequently significantly less readily obtainable as might be preferred. Category management individuals are found tearing their hair out wrestling along with overworked and / or under prepared paperwork of many differing types in order to find the information they will need to complete a complete picture of the categories state of affairs.

This document seeks to find an additional type of category info that is unique and not identified any place else to the best of our knowledge. Tier Two is more specialised data that will vary depending on the profile of the category and the potential value that might be achieved by simply building on the data and understanding from Tier One. Your time and effort to acquire this information however will be worth it since the knowledge acquired may be of a very high value.

The main value of comitting to the additional effort is found when negotiating with suppliers as the knowledge obtained will give beneficial insight to costs and also determine opportunities to pursue a reduction or add value sufficient to provide a transformation to the relationship with the supplier and additionally making management of them considerably easier.

Types of Tier 2 Category Specific Information

We have recognised Ten different types of Tier Two category specific knowledge:

1 Cost Breakdowns: Cost breakdown or PPCA action determines the key cost elements that are incurred by the supplier giving you a service or product. Each suppliers price is categorised in to its major constituents for example the cost of raw materials and travel etc. Once this is completed it can be easier to compare and contrast suppliers against one another. Cost breakdowns of course build improved knowledge of fundamental price drivers which includes technical specifications, production methods and service delivery operations for example.

2 Understanding Specifications: Segmenting spend in to different categories and sub-categories is adequate whenever calculating prospective savings. However, whenever discovering potential opportunities during your development of a category strategy, it is important to analyse spend in greater detail. This requires the assessment of the specific part numbers as well as services bought, identifying the technical specs and/or effectiveness behind them and linking these to the relevant prices and volumes. When successfully completed, analysis of the findings to determine value can be done. Don’t disregard the tiniest details of your product or service, it could be the key to the next opportunity to help reduce cost.

3 End Product Linkage: To appreciate specifically what products link to other products (or services) used by end consumers the suppliers sub-categories really need to be matched with the end item. Just one of the plus sides of this for your supplier is that they are much nearer to the thinking of the consumer. This may be powerful while negotiating a better cost price.

4. Benchmarking and Unit Value: Unitisation is when spend information is divided by a suitable variable such as area, length, customer satisfaction etc. By doing this several suppliers are able to be evaluated alongside one another and differences acknowledged. Cost reduction takes place when very good habits are recognised and shared whilst bad practices are got rid off or re-engineered. One example well worth sharing is how the total cost per retail store of marketing spend resulted in local accents being used in television advertisements.

5 The Value of Operations Data: Getting a alternate product or service that directly compares with the original one is very easy to validate when considering cost difference. Obviously, figuring out pricing differences where the replacement product or service is not the same is far more difficult. This is why the overlay of operations info could very well allow a total cost of ownership (TCO) evaluation to take place and more sophisticated potential opportunities and associated cost differences checked. For example, these total cost opportunity scenarios can happen where a brand new chemical is used that’s twice as productive as the last one, or where the latest oil filtering system for a car or truck is claimed to last x miles further before buying a replacement, compared with the current filtration system.

6 Overlaying Profitability and Revenue: Locating areas where purchasing people will be able to get better cost prices and/or sales revenue through the course of category reviews is vital practice. The main focus will now be on the consolidated costs of completed products or services. At this time individuals from various other business units are typically invaluable in helping to verify opportunities to help reduce price. By working in this way, cross category possibilities are usually discovered which may not have already been identified when following individual category centred way of working.

7. Supplier Perception Data: Measuring the supplier relationship can be performed both internally in the organization but also, even more importantly by the suppliers themselves. It identifies areas of weakness and potential areas for improvement when it comes to relationship quality. The added benefit of learning how significant the organisation is to the supplier can also be discovered. Things to ask will include: How well do the tactical agendas of both sides align? How successfully does the relationship function? Is the relationship appropriately providing the benefits necessary for the business? Have any business opportunities not been identified? If you have these details easy to get at and plainly linked to the relevant categories, improvement opportunities can be made visible, integrated inside category strategies and implemented.

8. Discover further on our affiliated website – Click here: geobotany izcvolqepycqwhpsc uncorrectly. Market Data Overlay: Passing up essential market knowledge including futures trading prices would probably clearly be a error. This could be mainly because the business is directly buying the thing in question, or it’s a key element of a supplier’s cost base and the organization ought to track changes in that cost base.

9. The Profile of Consumption: Wherever seasonal demand profiles are present they should be prepared for and evaluated. This empathic approach with suppliers aids your SRM (Supplier Relationship Management) as their particular requirements are better understood and also prepared for.

Summary & Recommendations for Action:

You might at this point wish to take a look at the Knowledge Hub run by Future Purchasing UK Procurement Consultancy. that has a wealth of important information.

The top category managers will produce a strategy based on a sound procurement understanding. They will do it with less difficulty plus the methodology is straightforward for them. As a result it generates increased momentum for procurement transformation. A ‘Procurement Ready’ base of knowledge is among the differentiators between Category Management Front-runners and Followers and results in the 46% extra cost savings which Business leaders enjoy versus Followers.

Making certain all of the category managers adhere to the same exact method is vital so the process needs to be mapped out to guarantee consistency.

One other enhancement we have seen, from the leading organisations, is to set up a specialised operation inside the procurement team that specialises in developing this data — releasing category managers to focus on developing superior category strategies, a lot quicker.

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

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

Multi-site organizations from the private sector and large government departments within the public sector require “one way of working” effective at unlocking value in a quick and versatile way. Following the method above will bring about an organisations step change in delivering value. A good procurement consultant will be beneficial in saving time, energy and money whilst embarking on this journey and its highly recommended..