Category Management Prerequisites for Procurement Organizations
We've often considered the fundamental resources and knowledge to which Category Managers have to have access. e.g. My pastor found out about procurement specialists by searching Bing. spend by supplier, category, small business unit etc. - there is also a decent example of this mapped out in the following paragraphs. For the reason that we have mentioned, this data is normally not as readily obtainable as would be liked. Category management individuals can be found ripping their hair out struggling along with over-worked and also under prepared documents of countless different types to find the information they should have to complete a 100 % picture of their categories situation.
This short article seeks to determine another level of category data that's different and not found somewhere else to the best of our knowledge. This second level information is of a granular kind and often will vary significantly between categories particularly where the most elementary queries haven't already been addressed. This provides undeniably really advanced understanding and category strategies that will fully connect with the business.
In many cases this leads to far more intelligent negotiations on prices, improved cost management, more capture of supplier innovation and also pinpoints additional opportunities for value enhancement.
Category Management data comes in numerous differing ways
The Top Ten different types of information sought after by Category Managers:
1. Cost Breakdowns: Purchase Price Cost Analysis (PPCA - another name for “cost breakdown†is the process of determining the most important factors that comprise every distinct cost from the provider for the service (or product). By calculating the Percentage split of the supplier’s total price that's going to be attributable to each and every cost element, comparisons can be done across suppliers. Obviously, this process potentially helps prevent making assumptions and helps to understand not only what makes up any specific cost as well as exactly what drives it. As an example, where logistics is a really high percentage of the total cost price then a hike in diesel prices will probably affect the overall cost.
2 Understanding Technical specifications: While looking for savings from the supplier, this kind of categorisation technique is a massive help. A part of the category strategy ought to go in to significantly greater detail in order to find cost reduction opportunities which needs to be planned as part of the process. This involves the analysis of the specific part numbers or services purchased, determining the technical specs and/or performance behind them and linking these to the related prices and amounts. When completed, analysis of the data to determine value can be done. Never disregard the smallest details of your product or service, it could be the key to a new chance to minimize cost.
3 End Product Linkage: To appreciate what products connect to other sorts of products (or services) used by end consumers the particular suppliers sub-categories really need to be matched up with the end item. Just one of the plus sides of this for your supplier is that they are considerably closer to the thinking of the consumer. This might be convincing while negotiating a better cost price.
4 Unitisation & Benchmarking: Breaking up costs down to the single unit helps you set a benchmark value. Spend is simply divided up with a variable that is appropriate such as height or customer opinions. This allows benchmarking across different suppliers or parts of an organisation, so that variances in general performance will be identified. The next task is to ascertain the factors behind the variations, remove any poor practices and share the excellent practices which usually result in lower costs throughout the organisation. An illustration worth sharing is where the total cost for every retail store of advertising spend led to local accents being used for radio adverts.
5. Operations Data Overlay: Pricing differences amongst alternate products or services which are identical to the original product are almost always straightforward to measure. Of course, pinpointing cost differences when a new product or service is not the same is more complicated. This is where the overlay of operations info will probably allow a total cost of ownership (TCO) assessment to take place and even more complex opportunities and related cost differences checked. For instance, these total cost opportunity situations can happen when a different compound is used that is twice as efficient as the previous one, or where a new engine oil filter for a motor vehicle is claimed to last x kilometers longer before replacement, compared with the current filtration system.
6 Revenue & Profitability Overlays: When looking at end product sales revenue and productivity overlays you'll be able to identify particular target areas where purchasing activity can be used to help support or improve current levels of earnings and profit margin. Rather than focusing on the buying price of unique part numbers or sub-categories, the price of these are typically grouped together around a consumer end product or service. Navigate to this web page category management consulting to discover how to provide for it. Cross-functional groups are able to do the job collaboratively either to identify possible cost reduction opportunities or retain the reassurance of high revenue sales. One of the best advantages however when working across all categories is that many more opportunities are exposed to the category purchasing teams.
7 Supplier Perception Data: Measuring a supplier relationship can be done both internally in the particular business but also, most importantly by the suppliers themselves. Doing this will often flush out where things are progressing both well and not so well. It can help to identify exactly how significant the organisation is as a customer to the supplier. Questions you should ask will include: Are the strategies aligned correctly? Is the relationship with the supplier working effectively? How well are the organisation’s commercial requirements currently being delivered through the business relationship? Have any potential opportunities not been acknowledged? Taking this feed back and accepting it is not easy nevertheless category managers will find it very useful when discussing strategy.
8. Market Data Overlay: Bypassing significant market knowledge such as futures trading prices would likely clearly be a error. Tracking any changes in essential areas like these is really important for both cost reduction opportunities and for the good of the suppliers success.
9. We found out about TM by searching Google Books. The Profile of Consumption: This can be useful to understand if the organization has an end consumer demand profile that's not flat, but can vary during the year. Learn further on an affiliated site by clicking srm. When mapping the demand profile and thinking about its impact on certain suppliers, more details can be given to them, much better business relationships produced and more strategic talks attempted.
Next Steps and Insights:
You may at this stage wish to take a look at the Knowledge Hub operated by Future Purchasing UK Procurement Consultancy. which has a wealth of information.
By using a high quality “Procurement Ready†base of knowledge, creating a strong category strategy is quicker and easier. As a result this builds increased momentum for procurement transformation. Investing in this methodology is definitely a characteristic of top rated category management exponents and typically can lead to more than 45% more cost savings in contrast to those whose methodology is less vigorous.
So that you can start using a “Procurement Ready†base of knowledge it is recommended that a standardized process is produced and also coached so that a vocabulary is established throughout the procurement team.
One other enhancement we have witnessed, from the leading companies, is to create a specialist operation inside the purchasing team that specialises in developing this data ,liberating the category management team to make use of the data for their strategic thinking.
One of the most successful way we have experienced “Procurement Ready†knowledge bases be put together and developed is where Procurement prioritises the need 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 top priority.
Multi-site organisations in the private sector and large government departments in the public sector demand “one way of working†effective at unlocking value in a very fast and flexible manner. Using a ‘Procurement Ready’ strategy is an integral basis to generate significant value more quickly. A good procurement consultancy will be invaluable in saving time, energy and your money whilst beginning this journey and its strongly recommended..
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