Category Management Requirements for Procurement Teams

The most essential information and numbers required by professionals working as Category Managers could possibly be written about thousands of times, examples include, supplier spend, category spend and even individual business unit spend — there is also a really good illustration mapped out below. As we have mentioned, this data is frequently significantly less readily available as would be liked. Even so, it’s absence is definitely known and reported by the Category Managers that must have fun playing ‘Spreadsheet Detective’ so that they can manually bridge the information gap!

Now we are turning the attention to the second tier of category information that’s not ever been documented or codified as far as we’re aware. This 2nd level information is of a granular kind and often will differ drastically between categories notably when the most elementary questions have not already been answered. Your time and effort to obtain this kind of knowledge however is undoubtedly well worth it as the information acquired is usually of a very high value.

In most cases this can lead to more intelligent negotiations on prices, much better cost control, greater capture of supplier innovation and identifies more options available for value enhancement.

Top 10 ways Procurement Teams really benefit from category data

The Best 10 different kinds of knowledge desired by Category Managers:

1 Breakdown the Cost: Cost breakdown or PPCA action determines the principle cost factors that are generally suffered by the supplier providing a service or product. By estimating the % split of the supplier’s price that is going to be attributable to each cost component, side by side somparisons can be done across suppliers. Obviously, this process potentially helps prevent making assumptions and helps to recognise not only what makes up almost any particular cost but also exactly what drives it. For example, where logistics is definitely a high % of the total cost price then a increase in oil prices will most likely affect the overall cost.

2. Understanding Specs: When you are evaluating cost savings from a supplier, this type of categorisation strategy is a massive help. A part of the category strategy ought to go into greater detail in order to find cost reduction opportunities and this should be scheduled as part of the process. This involves the assessment of the specific part numbers as well as services purchased, determining the technical specs and/or effectiveness behind them and connecting these to the relevant costs and volumes. When completed, analysis of the data to ascertain value is possible. For instance, this could be linked to the performance specification for part numbers of electronic components, departure times for defined air travel sectors, or the addresses associated with high-street network branches using security system reactive maintenance.

3. Finished Product Cross-fertilisation: This calls for an understanding of which sub-categories supplied by a supplier are used in which finished products sold to consumers and then making this obvious to the supplier. This can be used to motivate suppliers to offer best prices and/or new developments, so they feel directly connected to business development with the end customer which allows them to have an effect on demand for their own products and services.

4. Unitisation & Benchmarking: Breaking up costs right down to the individual unit helps to set a benchmark value. Visit geobotany izcvolqepycqwhpsc uncorrectly to read why to look at this hypothesis. Spend is divided up with a variable that is relevant such as height or customer feedback. In this way numerous suppliers can be assessed alongside one another and differences identified. Cost reduction occurs when beneficial habits are identified and then shared while damaging practices are eliminated or re-engineered. A good example of this method used by ourselves, was the analysis of unitised total FM costs in every square metre throughout eighty depots for a UK bus company.

5 The Value of Operations Data: Cost variations between alternate products or services that are exactly like the very first item tend to be simple to measure. Needless to say, pinpointing pricing differences when a alternative product or service is different is more challenging. That’s where the overlay of operations data files can make it possible for a total cost of ownership (TCO) evaluation to take place and much more complicated opportunities and related cost differences validated. For instance, these types of total cost opportunity situations can occur where a completely new additive is used which is two times as beneficial as the last one, or when a new oil filtering system for a car or truck is claimed to be able to last x miles longer before replacing, compared to the present filtration system.

6. Revenue & Profitability Overlays: Locating areas where purchasing teams are able to make improvements to cost prices and/or sales revenue throughout the course of category reviews is required practice. Instead of concentrating on the cost of specific part numbers or sub-categories, the expense of these are typically grouped together around a consumer end product or service. At this stage people from other departments are important in helping to authenticate opportunities to reduce cost. By working in this way, cross category opportunities will also be identified that might not have already been identified when pursuing the individual category targeted method of working.

7 Supplier Perception Data: This is structured qualitative responses from suppliers and also internal stakeholders on the current state of a relationship. The process can flush out where things are going both well and not very well. It assists you to determine exactly how significant the business is as a customer to the supplier. Questions you should ask will include: How well do the tactical activities of both sides align? How successfully does the working relationship function? How well are the organisation’s commercial requirements being delivered through the relationship? Specifically what improvement opportunities are obtainable? Using this feed back and accepting it is not necessarily easy but category managers will find it invaluable when talking about strategies.

8. Overlaying Market Data: Passing up essential sector data such as commodity prices would certainly clearly be a mistake. Monitoring all changes in important areas such as these is essential for both price reduction opportunities as well as for the good of the suppliers profitability.

9. Consumption Profile Where seasonal demand profiles exist they have to be prepared for and analysed. By mapping the demand profile and thinking about its impact on specific suppliers, more information should be given to them, more robust business relationships produced and more strategic talks attempted.

Summary & Recommendations for Action:

You’ll find information worth referring to on this topic by Future Purchasing Procurement Consultancy Services. on their website.

By using a high quality “Procurement Ready” knowledge base, establishing a strong category strategy is quicker and easier. As a result it builds increased momentum for change. Taking this strategy is regarded as a characteristic of top rated category management exponents and frequently can lead to in excess of 45% additional cost savings than those whose methodology is less vigorous.

In order to create a “Procurement Ready” knowledge base we recommend that a standardized model is designed and also coached to make sure a vocabulary is established throughout the procurement team.

The most forward thinking businesses have champions of this methodology whose job it is to ensure the procurement knowledge database is constantly updated ,liberating the category management team to use the information for their strategic thinking.

Prioritising the need for a Knowledge base is fundamental to being successful and has to be planned and prioritised to be able to improve ways of working.

Making category management a primary business competence of modern procurement departments should be a top priority.

Multi-site organisations from the private sector and large gov departments from the public sector need “one way of working” effective at unlocking value in a fast and versatile manner. Developing a ‘Procurement Ready’ strategy is an integral basis to deliver outstanding value much faster. Choosing the best procurement consultant to help you through the entire process is often the best way to go and staying away from the countless pitfalls out there..