The most essential data and numbers essential for professionals hired as Category Managers could possibly be written about a million times, e.g. spend by service provider, category, business unit etc. — there is also a decent example mapped out further down. For the reason that we have mentioned, this data is typically significantly less readily obtainable as would be preferred. We discovered procurement consulting reviews by browsing the New York Herald. Yet, it’s absence is undoubtedly known and reported by the Category Managers that have to play ‘Spreadsheet Detective’ in an attempt to manually close the information gap!
This article tries to determine an additional level of category info which is unique and not found any place else to the best of our knowledge. Tier 2 is more specialist information that will vary depending on the profile of the particular category and the potential value that could be obtained by simply building on the information and knowledge out of Tier One. Browse here at worth reading to explore how to ponder it. This gives genuinely ground breaking insight and category strategies that will fully connect with the particular business.
In many cases this can lead to far more informed negotiations, much better cost management, more capture of company innovation and pinpoints additional opportunities to get value growth.
Category Management Information comes in many different ways
The Top Ten distinct types of knowledge desired by Category Managers:
1 Breakdown the Cost: Purchase Price Cost Analysis (PPCA – another name for “cost breakdown” is considered the job of identifying the main factors that constitute any particular cost from a provider for the service (or product). Browse here at rate us to learn why to study it. By calculating the Percentage share of the supplier’s total price that is likely to be attributable to each cost element, side by side somparisons can be made across suppliers. Price breakdowns always build greater understanding of fundamental value drivers such as specs, manufacturing processes plus service delivery processes for example.
2. Specification Mapping: When you are evaluating savings from a supplier, this type of categorisation technique is a major help. However, while identifying opportunities during the development of a category strategy, it’s really important to review spend in more detail. This involves the examination of the specific part numbers as well as services bought, determining the specifications and/or effectiveness behind them and linking all of them to the related costs and amounts. This data will make it possible for in depth Value Analysis activity to be completed. 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 even the addresses of high-street network branches using alarm system reactive maintenance.
3 End Product Linkage: This requires an understanding of which sub-categories supplied by the supplier are being used in which finished products provided to consumers and making this accessible to the supplier. On the list of plus sides of this for your supplier is that they are considerably closer to the thinking of the consumer. This can be persuasive when negotiating an improved cost price.
4 Benchmarking and Unit Value: Breaking costs down to the single unit helps you determine a benchmark value. Spend is simply divided by a variable which is appropriate such as height or even customer feedback. In this way numerous suppliers are able to be assessed alongside one another and differences identified. The next task is to search for the causes of the variances, get rid of any bad practices and then share the good practices which contribute to lower costs across the organization. An illustration well worth sharing is where the total cost per retail outlet of marketing spend resulted in regional accents being used in radio ads.
5. The Value of Operations Data: Selecting a alternative product or service which directly compares with the previous one is easy to validate in terms of price differences. But unfortunately, where a alternate has got a different expected performance, the verification associated with a price variation is more challenging. Analysing the total cost of ownership can be carried out with the use of operations data which in addition to validating price variances may also realise more opportunities. Visiting advertiser seemingly provides tips you could give to your co-worker. For instance, these total cost opportunity scenarios can take place if a different additive is used which is twice as effective as the old one, or where the new motor oil filter for a vehicle is claimed to last x miles further before buying a replacement, compared with the current filtering system.
6. Revenue & Profitability Overlays: Locating areas where purchasing teams will be able to make improvements to cost prices and/or sales revenue through the course of category reviews is vital practice. Rather than focusing on the cost of individual part numbers or sub-categories, the price of these are grouped together around a consumer end product or service. Cross-functional groups are usually able to work collaboratively to either determine potential cost reduction opportunities or retain the guarantee of higher revenue sales. One of the biggest benefits however by working across all of the different categories is that many more potential opportunities are exposed to the category purchasing teams.
7. The Suppliers View on Data Measuring a supplier relationship can be done both internally in the organization but also, even more importantly by the suppliers theirselves. It detects instances of weakness and potential areas for improvement in working relationship quality. It helps to determine how important the organisation is as a customer to the supplier. Frequent themes asked about may include: Are your systems aligned correctly? Is the relationship with the supplier functioning well? Is the business relationship properly providing the benefits needed by the business? Have any potential opportunities not been acknowledged? By having these details easy to get at and clearly linked to the appropriate categories, improvement opportunities can be made visible, incorporated in category strategies and implemented.
8 Market Data Overlay: Bypassing significant market data including futures trading prices would probably clearly be a error in judgment. This might be because the business is directly purchasing the commodity in question, or perhaps it’s a key component in a supplier’s cost base and the organisation ought to observe a change in that cost base.
9. The Profile of Consumption: Anywhere seasonal demand profiles are present they have to be prepared for and analysed. When mapping this demand profile and thinking about its impact on certain suppliers, more information could be shared with them, much better business relationships produced and more strategic negotiations undertaken.
Summary & Recommendations for Action:
You might at this point want to check out the Knowledge Hub operated by Future Purchasing Procurement Consultants. which has a great deal of insight.
Using a high quality “Procurement Ready” base of knowledge, creating a solid category strategy is easier and quicker. As a result this encourages increased momentum for change. Investing in this method is regarded as a hallmark of top category management exponents and frequently can lead to in excess of 45% additional savings than those whose approach is less vigorous.
In order to use a “Procurement Ready” knowledge base our recommendation is that a consistent model is created and properly trained to ensure that a language is established throughout the purchasing team.
Another enhancement we have seen, at foremost organizations, is to create a specialised function inside the procurement team that specialises in developing this information ,liberating the category management team to make use of the information in their strategic thinking.
Prioritising the need for a Knowledge base is fundamental to success and must be designed and prioritised to be able to really transform ways of working.
Making category management a central commercial competence of modern procurement teams is a top priority.
Multi-site businesses from the private sector and large government departments inside the public sector must have “one way of working” capable of unlocking value in a quick and versatile manner. Putting into action a ‘Procurement Ready’ strategy is a vital building block to deliver outstanding value much faster. A procurement consultancy can be invaluable in saving time, energy and your money when beginning this journey and is strongly recommended..