The most important resources and details essential for people employed to work as Category Managers has been written about millions of times, examples include, supplier spend, category spend and also individual business unit spend — there is a good illustration mapped out in the following paragraphs. Suprisingly sometimes when most people come to hunt for this type of information, it’s not easy to locate. But the truth is, it’s absence is definitely known and lamented by the Category Managers that must play the game ‘Spreadsheet Detective’ in an attempt to manually bridge the information gap!
Right now we are turning our attention to the 2nd level of category data which has not found itself written about or codified so far as we’re informed. This kind of secondary tier data is of a granular kind and often will vary significantly between categories significantly where even the most basic questions have not already been answered. The effort to extract this knowledge however will be worthwhile since the data obtained is usually of a extremely high value.
The main importance of putting in the additional effort is gained whenever negotiating with suppliers because the information gained gives beneficial insight to spending as well as determine the opportunity 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 less difficult.
Category Management Knowledge comes in several unique ways
Category Management Information – 10 vital gaps it is necessary to fill:
1. Breakdown the Cost: Cost breakdown or PPCA activity determines the key cost factors that are generally suffered by the supplier supplying products or services. Every suppliers price is categorised into its key elements such as the price of raw materials as well as transportation and the like. When this is completed it is easier to assess suppliers against each other. Cost breakdowns always build greater knowledge of underlying value drivers which includes specs, manufacturing processes and service delivery operations for example.
2. Understanding Specifications: Segmenting spend in to categories and sub-categories is usually enough whenever calculating potential savings. Part of the category strategy ought to go into greater detail to find cost reduction opportunities which should be planned as part of the whole process. A large amount of analysis is needed to do this. It has to get in to the tiniest detail of the constituent part of a product or a service as these can be the most important drivers driving the cost price. This information will enable thorough Value Analysis activities to be carried out. Do not ever disregard the tiniest detail of any products or services, it might be the key to a new opportunity to reduce cost.
3. Finished Product Cross-fertilisation: This requires an awareness about which sub-categories supplied by the supplier are utilized in which finished products provided to customers and making this accessible to the supplier. This can be used to successfully encourage suppliers to provide the best prices and/or new developments, so that they feel instantly connected with business development with the end customer and can influence the demand for their own products and services.
4 Benchmarking and Unit Value: Breaking up costs down to the single unit helps you determine a benchmark value. Spend is divided by a variable that is appropriate such as height or customer opinions. This allows benchmarking across diverse suppliers or parts of an organisation, to ensure variations in performance can be identified. Cost reduction takes place when superior habits are identified and shared whilst poor processes are eliminated and / or re-engineered. An example well worth sharing is where the total cost per retail store of advertising spend led to regional accents being used for television ads.
5 Operations Data Overlay: Cost variations relating to alternative products or services that are exactly like the original product will definitely be simple to assess. Yet, where the substitution has got a completely different expected overall performance, the verification associated with a pricing difference is much more challenging. This is where the overlay of operations data could very well allow a total cost of ownership (TCO) assessment to take place and much more sophisticated business opportunities and related cost differences verified. An example of these kind of added benefits includes situations such as in which a electric battery is identified as lasting longer when compared to the old one or where the completely new additive boosts shelf life by 20% more.
6. Revenue & Profitability Overlays: Locating areas where procurement teams are able to make improvements to cost prices and/or revenue throughout the course of category reviews is recommened practice. Rather than being focused on the price of unique part numbers or sub-categories, the cost of these are generally grouped together around a consumer end product or service. Cross-functional teams are usually able to get the job done collaboratively either to establish potential cost reduction opportunities or retain the reassurance of high revenue sales. Geobotany Izcvolqepycqwhpsc Uncorrectly contains more about why to deal with it. One of the biggest benefits however by working across all of the categories is usually that additional potential opportunities are exposed to the category buying teams.
7 Supplier Perception Data: Measuring the supplier relationship can be performed both internally in the organization but also, most importantly by the suppliers themselves. This process may well flush out where things are going both well and not very well. It assists you to identify how significant the business is as a customer to the supplier. Frequent subjects covered include: Are the strategies aligned? How effectively does the working relationship work? Is the relationship appropriately providing the benefits needed by the business? Have any business opportunities not been identified? By having this information easy to get at and clearly linked to the appropriate categories, improvement opportunities can be made visible, incorporated inside category strategies and implemented.
8 Overlaying Market Data: Market data such as utility prices, materials prices, chemical prices, labour costs etc. must be available to relevant procurement team members. This might be mainly because the business is directly purchasing the commodity in question, or it is a key component of a supplier’s cost base and the business must track a change in that cost base.
9 Consumption Profile This can be beneficial to understand if the organisation has got an end customer demand profile that isn’t flat, but varies during the year. By mapping this demand profile and consequently thinking about its effect on certain suppliers, more details can be given to them, much better relationships produced and more strategic discussions started.
Next Steps and Insights:
You can find resources worth referring to about this subject matter by Future Purchasing Category Management Training Consultants. on their site.
Using a high quality “Procurement Ready” base of knowledge, creating a solid category strategy is quicker and easier. The likelihood of successful change programmes are increased as a result. A ‘Procurement Ready’ base of knowledge is among the differentiators between Category Management Front runners and Followers and contributes to the 46% additional savings that Front-runners benefit from versus Followers.
So that you can create a “Procurement Ready” base of knowledge it is recommended that a consistent method is produced and also trained to ensure that a vocabulary is established throughout the procurement team.
The most forward thinking businesses have champions of this approach whose job it is to ensure that the procurement knowledge database is always up-to-date — releasing category managers to focus on developing better category strategies, a lot quicker.
Quite possibly the most successful way we have seen “Procurement Ready” knowledge bases get put together and developed is when Procurement prioritises the desire for this kind of proficiency and establishes a plan to make it happen.
Making category management a core business competence of modern procurement teams is a main priority.
Multi-site companies from the private sector and large gov departments within the public sector have to have “one method of working” capable of unlocking value in a very fast and flexible way. Adopting the process above will bring about an organisations step change in delivering value. Choosing the best procurement consultant to guide you through the entire process is generally the easiest way to go and keeping away from the countless hurdles out there..