The most vital resources and facts essential for people hired as Category Managers has been recorded millions of times, for example, supplier spend, category spend and even individual business enterprise unit spend - there's a really good example mapped out in the following paragraphs. For the reason that we have said, this data is normally not as readily obtainable as might be preferred. Category management professionals can be heard ripping their hair out struggling along with overworked and / or under prepared documents of numerous differing types in order to find the information they need to complete a 100 % picture of the categories state of affairs.
This article tries to identify an additional level of category information that's different and not identified elsewhere to the best of our knowledge. Tier 2 is much more specialised information which will differ according to the profile of the category and the potential value that is achieved by building on the data and knowledge out of Tier 1. The time and effort to obtain this kind of information however can be well worth it as the data acquired can be of a very high value.
The main value of comitting to the additional efforts are found when negotiating with suppliers as the knowledge obtained can give important insight to prices as well as identify opportunities 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 much less complicated.
10 ways Purchasing Teams really benefit from category information
We've identified Ten kinds of Tier Two category specific knowledge:
1. Cost Breakdowns: Purchase Price Cost Analysis (PPCA - another term for “cost breakdown†is the job of identifying the major elements that comprise any distinct cost from the provider for the service (or product). By estimating the % share of the supplier’s total price that is likely to be attributable to each and every cost component, side by side somparisons can be made across suppliers. Of course, this process also prevents making assumptions and helps to understand not just what makes up almost any specific cost but also what normally drives it. One example is, where logistics is definitely a high % of the total cost price then a increase in diesel prices will impact on the total cost.
2. Specification Mapping: Segmenting spend down into categories and sub-categories is usually enough when calculating probable savings. However, whenever discovering opportunities during your creation of a category strategy, it's important to review spend in greater detail. This involves the analysis of the specific part numbers or services bought, determining the specs and/or effectiveness behind them and associating these to the relevant costs and amounts. This data will make it possible for comprehensive Value Analysis activities to be completed. For example, this could be linked to the performance specification for part numbers of electrical components, departure schedules for identified flight sectors, or the addresses of high street network branches getting security system reactive support.
3 End Product Linkage: To appreciate exactly what products link to other sorts of products (or services) used by end customers the suppliers sub-categories need to be matched up with the finished item. This can be used to persuade suppliers to provide best prices and/or new developments, to allow them to feel directly connected with business development with the end consumer which allows them to have an effect on the demand for their own products and services.
4 Unitisation & Benchmarking: Unitisation is where spend information is divided by a relevant variable eg area, length, customer satisfaction etc. This allows benchmarking across varied suppliers or parts of a business, in order that variances in performance will be identified. The next phase is to search for the causes of the differences, eliminate any damaging practices and share the best practices which usually result in lower costs across the business. An example well worth sharing is how the total cost for every retail store of advertising spend led to regional accents being used in radio ads.
5 Operations Data Overlay: The purchase of a substitute product or service that directly compares with the last one is simple to validate with regards to cost differences. But, where the substitute has got a totally different predicted overall performance, the verification associated with a price variation could be more complicated. This is why the overlay of operations info will probably allow a total cost of ownership (TCO) analysis to take place and even more sophisticated potential opportunities and associated cost differences checked. For example, these kind of total cost opportunity scenarios can occur if a new compound is used that's two times as productive as the last one, or when a new oil filtration system for a car or truck is claimed to last x kilometers longer before buying a replacement, in comparison with the present filtering system.
6. Revenue & Profitability Overlays: When looking at end product sales revenue and also profitability overlays you are able to find particular target areas where purchasing activities can be used to help support and / or boost current levels of earnings and profit margin. This wonderful rent purchasing consultants link has several lovely cautions for where to think over it. The attention will finally be on the consolidated costs of the completed products or services. Cross-functional teams are able to get the job done collaboratively either to identify potential cost reduction opportunities or support the guarantee of high revenue sales. Learn further on an affiliated use with by visiting this page is not affiliated. One of the greatest benefits however when working across all categories is usually that more opportunities are exposed to the category purchasing people.
7. Supplier Perception Data: This is structured qualitative feedback from suppliers and internal stakeholders concerning the present state of a relationship. It identifies areas of weakness and potential areas for improvement in relationship quality. The added benefit of learning how important the organisation is to the supplier can also be identified. Typical matters covered include: Are your strategies aligned correctly? How effectively does the relationship function? Is the business relationship successfully delivering the benefits required by the business? What improvement opportunities are obtainable? Using this feed back and then accepting it is not always easy however category managers will find it very helpful whilst discussing strategy.
8 Market Data Overlay: Passing up important industry information including commodity prices would clearly be a mistake. Keeping track of all changes in important areas like these is important for both cost reduction opportunities and for the good of the suppliers profitability.
9 Consumption Profile This can be beneficial to understand if the organization has an end customer demand profile that's not flat, and can vary throughout the year. When mapping this demand profile and considering its affect on certain suppliers, more information can be given to them, much stronger relationships produced and more strategic discussions started.
Next Steps and Insights:
You might at this point want to check out the Knowledge Hub run by Future Purchasing Category Management Training Consultants. which has a wealth of important info.
With a high quality “Procurement Ready†base of knowledge, generating a robust category strategy is quicker and easier. Supply Chain Consultant contains more about the meaning behind it. As a result this builds greater momentum for change. A ‘Procurement Ready’ knowledge base is one of the differentiators between Category Management Frontrunners and Followers and makes a contribution to the 46% additional savings which Front runners benefit from versus Followers.
If you want to create a “Procurement Ready†knowledge base it is recommended that a consistent process is developed and trained to make sure a vocabulary is established across the procurement team.
One other enhancement we have witnessed, at the leading organizations, is to build a expert function within the procurement team specialising in creating this information -- liberating category managers to concentrate on developing more effective category strategies, more quickly.
Prioritising the need for a Knowledge base is fundamental to achieving success and must be structured and prioritised in order to transform ways of working.
Making category management a primary commercial competence of modern procurement teams should be a top priority.
Multi-site companies from the private sector and large government departments within the public sector need “one way of working†effective at unlocking value in a quick and flexible way. Adopting the process above will bring about an organizations step change in delivering value. Selecting a procurement consultant that can help you throughout the process is often the easiest way to go and avoiding the many hurdles out there..
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