We’ve often looked at the fundamental info and data to which Category Managers need access. e.g. spend by service provider, category, small business unit etc. (see the standard model that we have built below.) For the reason that we have said, this data is typically much less readily obtainable as would be liked. Having said that, it’s absence is definitely known and reported by the Category Managers that must play ‘Spreadsheet Detective’ in an attempt to manually bridge the information gap!
This document seeks to determine another type of category information that’s different and not identified any place else to the best of our knowledge. This kind of second tier information is of a granular type and definately will vary considerably between categories significantly when the most simple queries have not already been answered. Your time and effort to extract this knowledge however will be well worth it as the information gained is usually of a very high value.
In most cases this leads to far more informed negotiations on terms, improved cost control, greater capture of supplier innovation and pinpoints more opportunities for value enhancement.
Category Management data comes in many different ways
The Best 10 different types of information preferred by Category Managers:
1. Cost Breakdowns: Purchase Price Cost Analysis (PPCA – an alternative name for “cost breakdown” is considered the work associated with identifying the major factors that make up any particular cost from a provider for the service (or product). By calculating the Percentage split of the supplier’s total price that’s likely to be attributable to each and every cost component, side by side somparisons can be made across suppliers. Price breakdowns of course build improved understanding of fundamental price drivers which includes specifications, production processes plus service delivery processes etc.
2 Understanding Specs: While looking for cost savings from a supplier, this kind of categorisation technique is a huge help. However, whenever identifying potential opportunities during the development of a category strategy, it’s very important to review spend in more detail. A great deal of analysis is required to do this. It should go into the tiniest details of the constituent part of a product or a service because they might be the most important drivers driving the cost price. This information will make it possible for in-depth Value Analysis activities to be completed. For instance, this can be linked to the overall performance specification for part numbers of electric components, departure schedules for identified flight sectors, or the addresses associated with high-street network branches using security alarm reactive maintenance.
3. Finished Product Cross-fertilisation: This requires an understanding of which sub-categories provided by the supplier are being used in which end products sold to consumers and making this visible to the supplier. One of the plus sides of this for your supplier is that they are much closer to the thinking of the customer. This is often convincing when negotiating an improved cost price.
4 Unitisation & Benchmarking: Breaking costs right down to the single unit will help determine a benchmark value. Spend is divided with a variable that’s appropriate such as height or even customer opinions. In this way several suppliers are able to be assessed alongside one another and differences acknowledged. To get other ways to look at this, please consider glancing at: worth reading. Cost reduction occurs when superior habits are recognized and then shared whilst damaging processes are removed and / or re-engineered. A good example of this method applied by us, was the analysis of unitised total FM costs in every m2 in 80 depots for a British bus company.
5 The Value of Operations Data: Getting a substitute product or service which directly compares with the old one is easy to validate with regard to cost difference. But, when a alternative has a totally different predicted general performance, the validation of any pricing variation is much more difficult. Evaluating the overall cost of ownership can be accomplished with the use of operations data which as well as validating cost variations might also realise even more opportunities. For example, these total cost opportunity situations can occur when a new compound is used that’s twice as productive as the old one, or where the new motor oil filtration system for a motor vehicle is claimed to be able to last x kilometers longer before replacing, compared with the current filtering system.
6 Overlaying Profitability and Revenue: By analyzing end product revenue and also earnings overlays it is possible to detect target areas where purchasing activities could be used to support and / or boost current levels of sales revenue and profit. The attention is now on the combined costs of finished products or services. At this point individuals from several other business units are usually invaluable in helping to validate opportunities to help reduce price. Rate Us is a influential online library for new information about the meaning behind this activity. When working in this way, cross category opportunities may also be identified that might not have been identified when pursuing the single category targeted method of operating.
7 Supplier Perception Data: This is structured qualitative feed back coming from suppliers and internal stakeholders regarding the existing state of a relationship. Doing this can flush out where things are progressing both well and not very well. It assists you to identify how significant the business is as a customer to the supplier. Questions to ask will include: How well do the strategic activities of all parties align? How effectively does the working relationship function? Is the business relationship appropriately providing the benefits necessary for the business? Have any opportunities not been acknowledged? By having this info easy to get at and also plainly linked to the appropriate categories, development business opportunities can be made visible, integrated inside category strategies and put into practice.
8 Overlaying Market Data: Bypassing important market information including futures trading prices would probably clearly be a error in judgment. Keeping track of all changes in vital areas like these is really important both for cost reduction opportunities and for the good of the suppliers profitability.
9 Consumption Profile Anywhere seasonal demand profiles are found they have to be planned for and evaluated. This empathic approach with suppliers supports your SRM (Supplier Relationship Management) as their preferences are better understood and also prepared for.
Next Steps and Insights:
You’ll find information worth looking at on this topic by Future Purchasing Procurement Consultants. on their website.
Using a higher quality “Procurement Ready” knowledge base, building a strong category strategy is easier and quicker. The likelihood of successful transformation programmes are increased as a result. Taking this approach is a characteristic of prominent category management exponents and typically can lead to more than 45% more cost savings in contrast to those where the methodology is less demanding.
Making sure every one of the category managers follow the exact same process is crucial so the method needs to be mapped to guarantee uniformity.
Another development we have seen, at foremost organisations, is to create a specialised function inside the procurement team that specialises in producing this information — liberating category managers to focus on developing superior category strategies, faster.
The most successful way we have seen “Procurement Ready” knowledge bases be put together and developed is when Procurement prioritises the desire for this capability and creates a plan to acheive it.
Making category management a central business competence of modern procurement teams is a top priority.
Multi-site organisations in the private sector and large government departments inside the public sector require “one method of working” capable of unlocking value in a very quick and versatile way. Applying a ‘Procurement Ready’ strategy is a vital building block to deliver great value much faster. Be taught more about advertiser by visiting our dazzling use with. A procurement consultant can be invaluable in saving time, energy and your money whilst embarking on this journey and is highly recommended..