We have often looked at the fundamental information and knowledge to which Category Managers require access. e.g. spend by supplier, category, business unit etc. – there is also a really good example mapped out listed below. Suprisingly maybe when people come to look for this kind of data, it’s a challenge to find. Category management specialists can be found pulling their hair out wrestling along with over-worked and / or under prepared files of numerous different sorts in order to find the data they must have to complete a 100 % picture of the categories situation.
This article attempts to identify another level of category info that is different and not identified somewhere else to the best of our knowledge. The second level data is of a granular variety and may vary drastically between categories particularly where the most elementary questions haven’t already been addressed. The time and effort to extract this knowledge however is undoubtedly worth it as the information obtained may be of a very high value.
The main importance of putting in the additional effort is gained whenever negotiating with suppliers because the information obtained can give valuable insight to operating costs and identify the opportunity to pursue a reduction or add value enough to provide a transformation to the relationship with the supplier furthermore making management of them better.
Top 10 ways Procurement Teams really benefit from category knowledge
The Best Ten different types of information wanted by Category Managers:
1 Cost Breakdowns: Cost breakdown or PPCA action determines the principle cost elements that are usually suffered by the supplier providing a product or service. By simply estimating the Percentage share of the supplier’s total price that is going to be attributable to every cost element, comparisons can be made across suppliers. Cost breakdowns always build improved understanding of underlying price drivers such as specifications, production processes plus service delivery operations for example.
2 Understanding Technical specifications: When you are evaluating savings from the supplier, this kind of categorisation method is a massive help. Part of the category strategy ought to go into significantly greater detail in order to find cost reduction opportunity which must be scheduled as part of the whole process. A lot of analysis is needed to do this. It has to go into the tiniest detail of the constituent part of a product or a service because these might be the main drivers driving the cost price. This level of detail will make it possible for comprehensive Value Analysis activity to be succesfully done. For instance, this can be linked to the overall performance specification for part numbers of electric components, departure times for defined flight sectors, or the addresses associated with high street network branches getting alarm system reactive maintenance.
3 Finished Product Cross-fertilisation: To understand exactly what products link to other products (or services) used by end customers the suppliers sub-categories really need to be matched up with the end item. Use this to encourage suppliers to give the best prices and/or innovation, so that they feel directly connected to business development with the end customer which allows them to influence demand for their own products and services.
4 Benchmarking and Unit Value: Breaking costs right down to the individual unit will help establish a benchmark value. Spend is divided up by a variable that is appropriate such as height or customer feedback. This enables benchmarking across varied suppliers or parts of a business, in order that variances in performance should be identified. The next task is to find the reasons for the variations, get rid of all poor practices and talk about the good practices that may result in lower prices throughout the organization. One example well worth sharing is where the total cost per retail outlet of advertising spend led to regional accents being used for radio advertising campaigns.
5. The Value of Operations Data: Pricing variations between substitute products or services that are exactly the same as the very first product have always been simple to evaluate. Of course, figuring out pricing variations where the new product or service is not the same may appear far more challenging. Studying the overall cost of ownership can be accomplished by using operations data which as well as verifying cost differences may also realise more business opportunities. This witty geobotany izcvolqepycqwhpsc uncorrectly encyclopedia has a few splendid cautions for the inner workings of it. An example of these advantages would include circumstances such as when a battery pack is identified as lasting for a longer period compared to the previous one or where a newer ingredient increases shelf life by 20% more.
Modelling Knowledge in Procurement
Developing a standard approach to Procurement Knowledge will help whenever analyzing and consequently quantifying the opportunity. Knowing which value levers to pull is the main skill for most category managers to look for a cost reduction opportunity.
Supply Chain Footprints:
Arranging your current suppliers on a map to indicate their location is typically the 1st step to perform whilst building a footprint. One step over and above this is to chart the location of small-scale suppliers and most importantly where goods involved with the chain originate. Determining these particular locations means that critical logistics risks are able to be monitored including guarantee of supply; reputation and ultimately, business oriented costs.
6 Revenue & Profitability Overlays: When evaluating end product sales revenue and earnings overlays it is possible to detect particular target areas where procurement activities could be used to support or enhance current levels of revenue and profit. The attention will finally be on the consolidated costs of the completed products or services. During this period individuals from other business units tend to be invaluable in helping to validate opportunities to reduce price. When working in this way, cross category possibilities can also be identified which might not have already been identified when pursuing the individual category targeted method of working.
7 The Suppliers View on Data Measuring a supplier relationship can be carried out both internally in the business but also, most importantly by the suppliers themselves. It discovers instances of weakness and possible areas for development in relationship quality. It assists you to determine exactly how important the organization is as a customer to the supplier. Normal subject areas asked about may include: How well do the tactical activities of all parties align? Is the relationship with the supplier working effectively? Is the relationship appropriately providing the benefits needed by the business? Have any potential opportunities not been identified? Using this feedback and then accepting it is not easy nevertheless category managers will find it very helpful when discussing strategies.
8 Overlaying Market Data: Passing up important sector information including futures trading prices would clearly be a error in judgment. Keeping track of any changes in vital areas such as these is important for both price reduction opportunities as well as for the good of the suppliers profitability.
9 Consumption Profile This is beneficial to have an understanding of when the organization has an end customer demand profile that is not flat, and can vary during the year. This kind of empathic approach with suppliers supports your SRM (Supplier Relationship Management) as their preferences are better understood and also planned for.
Next Steps and Insights:
There’s help and advice worth referring to about this subject matter by Future Purchasing Category Management Training Consultants. on their website.
The best category managers will build a strategy based on a great procurement understanding. They will certainly do it with less difficulty plus the approach is straightforward for them. As a result it generates increased momentum for change. Taking this strategy is a hallmark of leading category management exponents and typically can result in over 45% more cost savings than those where the approach is less vigorous.
Making sure that every one of the category managers stick to the exact same method is crucial therefore the method has to be planned to guarantee consistency.
The foremost forward thinking businesses have champions of this process whose duty it is to ensure that the procurement knowledge database is constantly up to date – liberating category managers to focus on building better category strategies, faster.
Prioritising the requirement for a Knowledge base is fundamental to success and has to be structured and prioritised in order to improve ways of working.
Making category management a central commercial competence of modern procurement departments should be a high priority.
Multi-site businesses from the private sector and large gov departments from the public sector need “one method of working” capable of unlocking value in a quick and versatile way. Following the process above will bring about an organisations step change in delivering value. A good procurement consultant will be helpful in saving time, energy and money whilst embarking on this type of journey and is highly recommended..