Category Management Prerequisites for Procurement Teams

We all have often looked over the essential resources and knowledge to which Category Managers require access. examples include, supplier spend, category spend along with individual business enterprise unit spend — there’s a decent example mapped out in the following paragraphs. For the reason that we have pointed out, this data is regularly significantly less readily available as might be liked. Having said that, it’s absence is definitely known and reported by the Category Managers that have to engage in ‘Spreadsheet Detective’ in an attempt to manually bridge the information gap!

This document tries to find an additional level of category knowledge that is unique and not identified anywhere else to the best of our knowledge. Tier 2 is more specialized information that will vary according to the profile of the category and also the potential value that may be achieved simply by building on the data and knowledge out of Tier One. The effort to obtain this kind of data however is undoubtedly worthwhile since the data gained is usually of a very high value.

In many cases this leads to far more informed negotiations, much better cost control, greater capture of supplier innovation and also identifies even more opportunities for value improvement.

10 ways Purchasing Teams utilize category knowledge

Category Management Information — 10 fundamental gaps it is vital to fill:

1. Breakdown the Cost: Cost breakdown or PPCA activity establishes the primary cost factors that are generally incurred by the supplier giving you a product or service. By calculating the Percentage split of the supplier’s total price that is going to be attributable to every cost element, side by side somparisons can be done across suppliers. Cost breakdowns also build improved knowledge of underlying cost drivers such as technical specifications, manufacturing processes and service delivery processes for example.

2. If you believe anything at all, you will perhaps need to research about geobotany izcvolqepycqwhpsc uncorrectly. Specification Mapping: Segmenting spend in to categories and even sub-categories is usually enough when calculating possible savings. However, when identifying potential opportunities during your creation of a category strategy, it’s really important to review spend in greater detail. This involves the assessment of the specific part numbers or services bought, determining the specifications and/or performance behind them and linking these to the related costs and amounts. This information will enable thorough Value Analysis activities to be completed. Don’t ever overlook the tiniest detail of your products or services, it might be the key to a new opportunity to reduce cost.

3 End Product Linkage: This requires an awareness of which sub-categories supplied by the supplier are utilized in which end products provided to consumers and making this accessible to the supplier. Use this to successfully persuade suppliers to provide best pricing and/or innovation, so that they feel directly connected to business development with the end customer and can have an impact on the demand for their own products and services.

4. Unitisation & Benchmarking: Breaking costs down to the individual unit helps to establish a benchmark value. Spend is simply divided by a variable that’s appropriate such as height or even customer feedback. By doing this numerous suppliers are able to be assessed against each other and difference identified. The next task is to look for the reasons behind the variances, eliminate all damaging practices and talk about the excellent practices that may produce lower costs across the business. An illustration worth sharing is where the total cost for every retail store of advertising spend led to local accents being used for television ads.

5 The Value of Operations Data: Pricing variations amongst alternative products or services that are exactly the same as the original product have always been simple to evaluate. Naturally, finding out pricing differences where a new product or service is not the same is much more difficult. This is when the overlay of operations information could very well allow a total cost of ownership (TCO) assessment to take place and many more challenging business opportunities and related cost differences checked. Examples of these added benefits include scenarios such as where a battery is identified as lasting for a longer period in comparison to the previous one or where a newer preservative increases shelf-life by 20% more.

The ‘Procurement Ready’ Knowledge Model

Possessing a consistent approach to Procurement data will help while analyzing and consequently quantifying the opportunity. Knowing which value levers to pull is an essential skill for all category managers to look for a cost reduction opportunity.

The Supply Chain Footprint:

This involves mapping 1st tier vendors and then identifying the geographic regions from where they supply your organization. 1 step beyond this is to map the address of smaller suppliers and most importantly exactly where products involved with the chain come from. Pinpointing all these addresses ensures that important logistics risks can be monitored this includes assurance of supply; standing and ultimately, business oriented costs.

6. Overlaying Profitability and Revenue: Locating areas where purchasing people are able to make improvements to cost prices and/or revenue over the course of category reviews is recommened practice. The main focus will finally be on the consolidated costs of the completed products or services. At this stage individuals from other departments are almost always important in helping to validate opportunities to reduce price. One of the biggest advantages however by working across all categories is that additional potential opportunities are exposed to the category buying people.

7. The Suppliers View on Data This is structured qualitative responses from suppliers and internal stakeholders concerning the present state of a relationship. It detects instances of weakness and also possible areas for development in relationship quality. It can help to identify exactly how significant the organisation is as a customer to the supplier. Usual subjects asked about include things like: Are your tactics aligned correctly? Is the business relationship with the supplier functioning effectively? How well are the organisation’s business needs currently being delivered through the relationship? What development opportunities are available? Using this feed back and then accepting it is not necessarily always easy nevertheless category managers will find it helpful when talking about strategy.

8 Market Data Overlay: Bypassing significant sector knowledge such as commodity prices would most likely clearly be a error. Monitoring any changes in important areas like these is important for both price reduction opportunities and for the good of the suppliers success.

9. Consumption Profile This can be beneficial to have an understanding of when the organisation has got an end consumer demand profile that isn’t flat, and varies during the year. This empathic methodology with suppliers helps your SRM (Supplier Relationship Management) as their preferences are better understood and also prepared for.

Summary & Recommendations for Action:

You might at this point want to investigate the Knowledge Hub operated by Future Purchasing Category Management Procurement Training Consultants. which has a wealth of important information.

Having a high quality “Procurement Ready” knowledge base, establishing a highly effective category strategy is easier and quicker. The probability of successful change programs are raised as a result. Investing in this methodology is a characteristic of prominent category management exponents and frequently can lead to more than 45% more savings compared to those where the approach is less vigorous.

In order to implement a “Procurement Ready” base of knowledge it is recommended that a consistent method is developed and also properly trained to make sure a language is established throughout the purchasing team.

The most forward thinking businesses have champions of this process whose role it is to make certain the procurement knowledge database is always up to date ,freeing up the category management team to use the knowledge in their strategic thinking.

Prioritising the requirement for a Knowledge base is fundamental to success and must be structured and prioritised so that they can improve ways of working.

Neglecting Category Management in modern-day purchasing teams is no longer an option and should get prioritised.

Multi-site organizations in the private sector and large gov departments inside the public sector need “one way of working” capable of unlocking value in a very quick and versatile way. Following the method above will bring about an organisations step change in providing value. A procurement consultancy will be invaluable in saving time, energy and money whilst embarking on this type of journey and is strongly recommended..