Important Knowledge in Category Management — the specifics for Procurement Teams

The most essential info and numbers required by people working as Category Managers could possibly be documented a million times, examples include, supplier spend, category spend and individual business enterprise unit spend (see the standard model that we have developed listed below.) As we have pointed out, this information is frequently much less readily available as would be liked. Category management experts are found ripping their hair out wrestling along with over-worked and also under prepared documentation of numerous different types in order to find the info they must have to complete a full picture of their categories situation.

At present we are turning our attention to the second level of category information which has not found itself written about or codified as far as we’ve been aware. Tier Two is far more specialised data that will vary according to the profile of the category and the potential value that may be achieved by building on the data and knowledge out of Tier 1. Your time and effort to obtain this kind of information however is worthwhile since the data gained is often of a extremely high value.

The main importance of comitting to the additional effort is found whenever negotiating with suppliers as the data gained will offer useful insight to prices as well as determine opportunities to go after a reduction and / or add value sufficient to provide a transformation to the relationship with the supplier also making management of them easier.

Different types of Tier 2 Category Specific Information

Category Management Information – 10 important gaps it’s fundamental to fill:

1 Breakdown the Cost: Cost breakdown or PPCA activity figures out the primary cost elements that are generally incurred by the supplier giving you a service or product. Each suppliers price is broken down in to its major constituents including the price of raw materials as well as travel and the like. After this is completed it’s much easier to assess suppliers against each other. Price breakdowns always build greater knowledge of fundamental price drivers such as specifications, manufacturing methods plus service delivery operations for example.

2 Specification Mapping: Segmenting spend in to different categories and even sub-categories will be adequate whenever calculating possible savings. A part of the category strategy ought to go into greater detail to find cost reduction opportunity which needs to be designed as part of the process. Identify further about geobotany izcvolqepycqwhpsc uncorrectly by navigating to our forceful essay. This requires the assessment of the specific part numbers as well as services purchased, determining the specifications and/or effectiveness behind them and associating these to the relevant prices and volumes. This information will make it possible for in depth Value Analysis activity to be succesfully done. Do not ever overlook the smallest details of your product or service, it may be one of the keys to the next chance to minimize cost.

3 Finished Product Cross-fertilisation: To appreciate specifically what products connect with other types of products (or services) used by end customers the particular suppliers sub-categories really needs to be matched with the end item. This can be used to successfully persuade suppliers to provide best pricing and/or new developments, so they feel directly connected to business development with the end consumer and can influence the demand for their own products and services.

4. Unitisation & Benchmarking: Unitisation is where spend data is divided by a relevant variable eg area, length, customer satisfaction etc. By doing this different suppliers can be assessed against one another and difference identified. Cost reduction takes place when very good habits are recognized and then shared whilst bad practices are removed or re-engineered. An illustration worth sharing is how the total cost for every retail outlet of advertising spend resulted in local accents being used for television advertising campaigns.

5 Operations Data Overlay: Getting a substitute product or service that directly compares with the last one is very easy to validate with regard to price differences. However, pinpointing price variations where the new product or service is not the same is more complicated. Evaluating the total cost of ownership can be carried out by using operations data files which as well as validating pricing variances could also realise additional potential opportunities. A example of these kind of added benefits include scenarios such as in which a battery is identified as lasting for a longer time in comparison to the current one or where the all new ingredient improves life expectancy by 20% more.

Modelling Knowledge in Procurement

In all cases category managers must consider which value levers could present brand new business opportunities for the purpose of obtaining more benefits and also what types of ‘Procurement Ready’ data will help discover and quantify those opportunities.

The Supply Chain Footprint:

Arranging your primary suppliers on a map to show their location is the 1st step to perform whilst building a footprint. The next task is to map more layers of the supply chain and relevant production locations. Identifying these locations makes sure that important supply chain risks can be monitored this includes guarantee of supply; standing and naturally, commercial costs.

6. Revenue & Profitability Overlays: By going over end product sales revenue and profitability overlays you are able to detect particular target areas where procurement activity could be used to help support and / or increase current levels of sales revenue and profit margin. The main focus is now on the combined costs of the completed products or services. Cross-functional groups are usually able to do the job collaboratively either to determine possible cost reduction opportunities or support the peace of mind of high revenue sales. When working in this way, cross category possibilities are usually discovered that might not have been identified when following a individual category focused way of operating.

7 Supplier Perception Data: This is structured qualitative responses coming from suppliers and internal stakeholders on the present condition of a relationship. Carrying this out will often flush out where things are running both well and not so well. The additional benefit of learning how vital the organisation is to the supplier may also be discovered. Normal topics covered include: How well do the tactical agendas of all parties align? Is the relationship with the supplier working effectively? How well are the organisation’s commercial needs currently being delivered through the relationship? Have any business opportunities not been acknowledged? If you have this data easy to get at and also plainly linked to the relevant categories, improvement business opportunities can be made visible, incorporated in category strategies and executed.

8 Overlaying Market Data: Passing up important industry data including commodity prices would certainly clearly be a error. This might be mainly because the organization is directly buying the commodity in question, or it is a key component of a supplier’s cost base and the business needs to monitor a change in that cost base.

9. Consumption Profile This is helpful to have an understanding of when the organization has an end consumer demand profile that’s not flat, and varies during the year. By mapping this demand profile and considering its effect on particular suppliers, more details should be shared with them, more robust business relationships produced and more strategic negotiations attempted.

Next Steps and Insights:

You will find information worth referring to on this topic by Future Purchasing Procurement Consultants UK. on their site.

Using a higher quality “Procurement Ready” knowledge base, building a highly effective category strategy is quicker and easier. As a result this generates increased momentum for procurement transformation. Taking this method is definitely a hallmark of foremost category management exponents and frequently can result in in excess of 45% more cost savings compared to those where the methodology is less vigorous.

In order to start using a “Procurement Ready” knowledge base it is recommended that a consistent model is designed and then coached to make certain that a vocabulary is established across the purchasing team.

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

Prioritising the need for a Knowledge base is fundamental to success and must be designed and prioritised to be able to improve ways of working.

Making category management a key business competence of modern procurement teams should be a top priority.

Both public and private sector companies should provide procurement kpi’s efficiently and competently. Following the method above will bring about an organisations step change in giving value. A good procurement consultant will be helpful in saving time, energy and your money whilst beginning this journey and is strongly recommended..

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