The most vital information and facts essential for people working as Category Managers has been documented a million times, examples include, supplier spend, category spend and also individual business unit spend – there is also a good example mapped out further down. Suprisingly perhaps when people come to look for this type of information, it can be hard to find. Even so, it’s absence is undoubtedly recognized and reported by the Category Managers that must engage in ‘Spreadsheet Detective’ so they can manually bridge the information gap!
This article seeks to identify another level of category knowledge that’s different and not found anywhere else to the best of our knowledge. Tier 2 is much more specialist data which will vary depending on the profile of the particular category and also the potential value that might be achieved by simply building on the facts and understanding out of Tier 1. This provides genuinely innovative information and category strategies that fully connect with the business.
The main value of putting in the extra efforts are gained when negotiating with suppliers because the data gained can give valuable insight to operating costs and determine opportunities to go after a reduction and / or add value enough to provide a transformation to the relationship with the supplier furthermore making management of them much easier.
10 ways Procurement Teams take advantage of category knowledge
We’ve recognised 10 different types of Tier 2 category specific data:
1 Cost Breakdowns: Purchase Price Cost Analysis (PPCA – an alternative term for “cost breakdown” is considered the work associated with identifying the primary elements that constitute any particular cost from a supplier for their service (or product). By simply estimating the Percentage split of the supplier’s total price that is going to be attributable to each cost component, side by side somparisons can be made across suppliers. Obviously, this process potentially helps prevent making assumptions and helps to recognise not only what makes up almost any particular price but also what drives it. For example, where logistics could be a high % of the total cost price then a hike in oil prices will definitely impact on the total cost.
2. Specification Mapping: When looking for savings from a supplier, this type of categorisation approach is a major help. However, while identifying opportunities during the development of a category strategy, it’s important to review spend in great detail. A considerable amount of analysis is needed to achieve this. It needs to get in to the tiniest details of the constituent part of a product or a service because they can be the most important drivers behind the cost price. This level of detail will make it possible for in depth Value Analysis activity to be performed. For example, this could be linked to the overall performance specification for part numbers of electric components, departure times for identified air travel sectors, or the addresses associated with high-street network branches receiving alarm system reactive maintenance.
3 Finished Product Cross-fertilisation: To understand what products connect to other types of products (or services) used by end customers the particular suppliers sub-categories have to be matched up with the finished product. 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 powerful while negotiating an improved cost price.
4. Unitisation & Benchmarking: Unitisation is where spend data is divided by a appropriate variable such as area, length, customer satisfaction etc. This enables benchmarking across diverse suppliers or areas of a business, to ensure that variations in general performance should be identified. Cost reduction occurs when great habits are identified and then shared while damaging processes are got rid off and / or re-engineered. One example well worth sharing is how the total cost for every retail store of marketing spend resulted in local accents being used for radio advertisements.
5 Operations Data Overlay: Selecting a substitute product or service which directly compares with the last one is straightforward to validate with regard to cost difference. Obviously, pinpointing cost variations where a alternative product or service is not the same is more challenging. This is why the overlay of operations knowledge will probably make it possible for a total cost of ownership (TCO) evaluation to take place and much more sophisticated opportunities and associated cost differences checked. For instance, these kind of total cost opportunity scenarios could happen where a brand new additive is used that’s twice as effective as the old one, or where the new oil filtration system for a vehicle is claimed to be able to last x kilometers longer before replacement, compared to the current filtering system.
6 Revenue & Profitability Overlays: When looking at end product sales revenue and also earnings overlays you are able to find particular target areas where purchasing activity will be used to help support and / or improve current levels of product sales and profit margin. The main focus will finally be on the combined costs of completed products or services. During this period people from various other business units are almost always invaluable in helping to validate opportunities to help reduce price. By working in this way, cross category opportunities may also be identified which might not have been identified when pursuing the single category targeted way of operating.
7. Supplier Perception Data: Measuring a supplier relationship can be done both internally in the business but also, even more importantly by the suppliers theirselves. This process can identify where things are running both well and not very well. The additional benefit of learning how important the business is to the supplier is also identified. Normal topics asked about include: Are the procedures aligned correctly? How successfully does the working relationship function? Is the relationship appropriately supplying the benefits required by the business? Specifically what development business opportunities are obtainable? Taking this feed back and accepting it is not always easy however category managers will find it priceless whilst talking about strategies.
8 Market Data Overlay: Marketplace information that include energy prices, materials costs, chemical costs, labour costs etc. really needs to be made available to relevant procurement team members. This could be simply because the organisation is directly buying the thing in question, or perhaps it’s a key element of a supplier’s cost base and the organisation must track changes in that cost base.
9. The Profile of Consumption: This is helpful to have an understanding of when the organization has an end customer demand profile that’s not flat, and varies throughout the year. This empathic methodology with suppliers assists your SRM (Supplier Relationship Management) as their particular demands are better understood and prepared for.
Next Steps and Insights:
There’s information worth looking at on this subject by Future Purchasing Procurement Transformation Consultants. on their site.
The most effective category managers will definitely build a strategy based on a solid procurement understanding. If you wish to be taught further about geobotany izcvolqepycqwhpsc uncorrectly, we know about thousands of resources people can investigate. They’ll make it happen with less difficulty and the approach needn’t be hard for them. As a result it builds increased momentum for change. Investing in this method is regarded as a hallmark of top rated category management exponents and typically can result in over 45% additional cost savings in contrast to those where the methodology is less vigorous.
Making certain all of the category managers keep to the same method is essential so the method should be mapped out to ensure uniformity.
The most forward thinking businesses have champions of this methodology whose job it is to ensure that the procurement knowledge database is constantly up-to-date – releasing category managers to concentrate on building better category strategies, more quickly.
Prioritising the need for a Knowledge base is fundamental to being successful and must be designed and prioritised to be able to improve ways of working.
Dismissing Category Management in present day procurement departments is no longer an option and must be prioritised.
Both public and private sector organisations must deliver procurement kpi’s efficiently and in the right way. Putting into action a ‘Procurement Ready’ strategy is an essential basis to provide significant value faster. A procurement consultancy will be helpful in saving time, energy and money when beginning this type of journey and it is strongly recommended..