Required Know-how in Category Management – the essentials for Purchasing Organizations

We all have frequently looked at the fundamental information and knowledge to which Category Managers need to have access. e.g. spend by service provider, category, small business unit etc. (see the standard model we have created in the following paragraphs.) Suprisingly sometimes when most people come to search for this type of info, it’s a challenge to locate. Category management specialists can be found tearing their hair out struggling with over-worked or simply under prepared documentation of many differing types to find the data they must have to complete a complete picture of their categories state of affairs.

This short article attempts to identify another type of category data which is different and not revealed anywhere else to the best of our knowledge. This kind of 2nd tier information is of a granular kind and often will vary considerably between categories particularly where even the most basic queries have not already been answered. This provides you with genuinely innovative insight and category strategies that will fully connect with the business enterprise.

The main value of comitting to the additional efforts are found when negotiating with suppliers because the information obtained will offer beneficial insight to prices as well as identify opportunities to pursue a reduction and / or add value enough to provide a transformation to the relationship with the supplier and also making management of them much less complicated.

Category Management data comes in numerous differing ways

The Top 10 different types of knowledge preferred by Category Managers:

1 Cost Breakdowns: Cost breakdown or PPCA activity establishes the primary cost factors that are usually suffered by the supplier providing services or products. Every suppliers price is categorised in to its main constituents for instance, the cost of raw materials as well as transportation etc. When that is successfully completed it’s much easier to assess suppliers against one another. Obviously, using this method also prevents making assumptions and will help to understand not just what makes up any specific price but also exactly what drives it. As an example, wherever logistics is a high % of the overall cost price then a increase in gasoline or diesel prices will impact on the overall cost.

2 Specification Mapping: Segmenting spend into different categories and even sub-categories is usually enough when estimating prospective savings. A part of the category strategy ought to go into greater detail to find cost reduction opportunity and this should be planned as part of the whole process. A lot of analysis is needed to achieve this. It needs to get in to the tiniest details of a constituent part of a product or a service because these could be the main drivers driving the cost price. This information will enable in-depth Value Analysis activities to be succesfully done. For instance, this can be linked to the overall performance specification for part numbers of electrical components, departure schedules for identified flight sectors, or the addresses associated with high-street network branches receiving security system reactive maintenance.

3. This witty geobotany izcvolqepycqwhpsc uncorrectly essay has endless elegant warnings for how to ponder it. Finished Product Cross-fertilisation: This requires an understanding of which sub-categories provided by a supplier are utilized in which finished products sold to consumers and then making this accessible to the supplier. This can be used in order to encourage suppliers to provide best prices and/or new developments, so they feel directly connected to business development with the end consumer which allows them to have an impact on the demand for their own products and services.

4 Unitisation & Benchmarking: Breaking costs down to the single unit helps to determine a benchmark value. Spend is simply divided up with a variable which is appropriate such as height or even customer opinions. In this way several suppliers are able to be evaluated against each other and difference identified. The next task is to discover the causes of the variances, eradicate any bad practices and then talk about the excellent practices which contribute to lower prices throughout the business. An example of this method used by us, was the analysis of unitised total FM costs in every square metre throughout eighty depots for a UK bus business.

5 Operations Data Overlay: Getting a substitute product or service that directly compares with the former one is straightforward to validate in terms of price differences. Needless to say, pinpointing pricing variations where the new product or service is different may appear far more challenging. This is where the overlay of operations knowledge will probably allow a total cost of ownership (TCO) analysis to take place and even more challenging business opportunities and related cost differences validated. An example of these kind of added benefits includes situations such as in which a battery is identified as lasting for a longer period when compared to the current one or where a all new preservative improves life expectancy by 20% extra.

6 Overlaying Profitability and Revenue: When analyzing end product revenue and also earnings overlays you’ll be able to detect particular target areas where purchasing activities could be used to support and / or improve current levels of earnings and profit margin. Instead of focusing 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. Cross-functional teams can then do the job collaboratively either to identify potential cost reduction opportunities or retain the peace of mind of high revenue sales. By working in this way, cross category opportunities should also be identified which might not have already been identified by following a single category centred method of operating.

7. Supplier Perception Data: Measuring the supplier relationship can be performed both internally in the particular business but also, even more importantly by the suppliers theirselves. It detects areas of weakness and potential areas for improvement in relationship quality. It helps you to identify exactly how important the organization is as a customer to the supplier. Frequent topics covered may include: Are the procedures aligned correctly? How effectively does the relationship work? How well are the organisation’s commercial requirements currently being delivered through the business relationship? What improvement business opportunities are obtainable? Taking this feedback and accepting it is not necessarily always easy but category managers will find it beneficial when discussing strategy.

8 Market Data Overlay: Bypassing significant market data including commodity prices would most likely clearly be a error in judgment. Monitoring all changes in very important areas such as these is crucial for both price reduction opportunities as well as the good of the suppliers sales and profits.

9. Consumption Profile Where seasonal demand profiles can be found they must be planned for and evaluated. This kind of empathic methodology with suppliers aids your SRM (Supplier Relationship Management) as their preferences are better understood and also prepared for.

Summary & Recommendations for Action:

You might at this stage want to have a look at the Knowledge Hub run by Future Purchasing UK Procurement Consultancy. which has a wealth of important information.

The best category managers will create a strategy based on a formidable procurement understanding. They will get it done more easily and the strategy is straightforward for them. As a result this encourages increased momentum for change. Investing in this method is regarded as a characteristic of top rated category management exponents and frequently can lead to over 45% additional savings compared to those where the approach is less vigorous.

Making sure that all category managers adhere to the same exact process is critical so the process should be mapped out to ensure uniformity.

The foremost forward thinking businesses have champions of this process whose role it is to ensure that the procurement knowledge database is constantly updated – liberating category managers to concentrate on building more effective category strategies, much faster.

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

Overlooking Category Management in modern day purchasing departments isn’t an option and should be prioritised.

Multi-site organisations from the private sector and large government departments within the public sector demand “one method of working” capable of unlocking value in a very fast and flexible way. Putting into action a ‘Procurement Ready’ strategy is a key basis to deliver outstanding value much faster. A procurement consultant will be beneficial in saving time, energy and money when embarking on this journey and is highly recommended..

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