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The Importance of a Category Management Knowledge Store In Procurement Departments
02-20-2016, 05:15 PM
Post: #1
Big Grin The Importance of a Category Management Knowledge Store In Procurement Departments
Specific Category Management Information

We've often looked over the fundamental info and knowledge to which Category Managers need access. e.g. spend by service provider, category, small business unit etc. This dazzling official site link has various staggering warnings for when to ponder it. (see the standard model we've designed listed below.) As we have mentioned, this data is frequently not as readily obtainable as would be preferred. At the same time, it’s absence is unquestionably recognized and reported by the Category Managers that have to have fun playing ‘Spreadsheet Detective’ in an attempt to manually bridge the information gap!

Now we are turning our attention to the second level of category knowledge which has not been written about or codified as far as we are informed. This second level information is of a granular variety and often will differ substantially between categories significantly where even the most elementary queries haven't already been answered. This provides genuinely ground breaking understanding and category strategies which will fully connect with the business. Investigate Supplier Relationship Management is a lovely online database for additional info about how to provide for it.

The main value of comitting to the additional efforts are found when negotiating with suppliers as the data obtained gives important insight to prices and identify opportunities to go after a reduction or add value sufficient to provide a transformation to the relationship with the supplier also making management of them considerably easier.

Category Management Knowledge comes in several unique ways

Category Management data -- Ten fundamental gaps it's important to fill:

1. Breakdown the Cost: Cost breakdown or PPCA action establishes the main cost factors that are generally incurred by the supplier supplying products or services. By simply estimating the % share of the supplier’s total price that's going to be attributable to each and every cost component, comparisons can be made across suppliers. Cost breakdowns always build improved understanding of fundamental price drivers which includes technical specifications, manufacturing methods plus service delivery processes for example.

2 Understanding Specs: Segmenting spend in to categories and even sub-categories will be enough whenever estimating probable cost savings. However, whenever identifying opportunities during your creation of a category strategy, it's really important to analyse spend in more detail. A lot of analysis is necessary to achieve this. It must get in to the smallest details of a constituent part of a product or a service because they could be the main drivers behind the cost price. Once successfully completed, analysis of the data to establish value is possible. For example, this can be linked to the performance specification for part numbers of electrical components, departure schedules for defined air travel sectors, or the addresses of high street network branches using alarm system reactive support.

3 End Product Linkage: To appreciate what products link to other sorts of products (or services) used by end consumers the suppliers sub-categories really needs to be matched with the end product. Use this to successfully persuade suppliers to give best prices and/or innovation, so that they feel instantly connected with business development with the end consumer and can influence demand for their own products and services.

4 Unitisation & Benchmarking: Breaking costs down to the individual unit will help set a benchmark value. Spend is simply divided with a variable that's appropriate such as height or customer feedback. By doing this numerous suppliers can be assessed alongside one another and differences identified. Cost reduction takes place when great habits are recognised and shared while damaging practices are removed or re-engineered. An example of this approach used by us, was the analysis of unitised total FM costs in each m2 across eighty depots for a British bus company.

5 The Value of Operations Data: Pricing differences among replacement products or services which are exactly like the very first item are generally straightforward to evaluate. However, finding out price variations where the alternative product or service is different is far more difficult. Evaluating the total cost of ownership can be carried out with the use of operations data which in addition to verifying price variations may well realise far more potential opportunities. Examples of these benefits include scenarios such as in which a battery is identified as lasting longer compared to the previous one or where a completely new chemical boosts life expectancy by 20% extra.



6 Revenue & Profitability Overlays: By analyzing end product revenue and profitability overlays you'll be able to identify target areas where purchasing activities will be used to support or improve current levels of income and profit. Instead of focusing on the price of unique part numbers or sub-categories, the expense of these are typically grouped together around a consumer end product or service. My pastor discovered category management consulting by browsing the Internet. Cross-functional teams may then get the job done collaboratively either to determine probable cost reduction opportunities or support the assurance of higher revenue sales. When working in this way, cross category possibilities may also be identified which may not have already been identified when pursuing the single category focused way of working.

7. The Suppliers View on Data This is structured qualitative feed back from suppliers and internal stakeholders regarding the current condition of a relationship. It detects areas of weakness and potential areas for improvement when it comes to working relationship quality. The additional benefit of learning how important the organization is to the supplier is also discovered. Things to ask will include: How well do the tactical agendas of both sides align? Is the business relationship with the supplier working well? How well are the organisation’s commercial demands currently being delivered through the business relationship? Have any opportunities not been identified? With this data easy to get to and plainly linked to the relevant categories, improvement opportunities can be made visible, incorporated inside category strategies and executed.

8. Overlaying Market Data: Bypassing important sector information including commodity prices would probably clearly be a error in judgment. Keeping track of all changes in important areas such as these is crucial for both cost reduction opportunities as well as for the good of the suppliers success.

9 Consumption Profile This can be beneficial to have an understanding of if the organization has got an end consumer demand profile that is not flat, and can vary during the year. By mapping the demand profile and consequently considering its affect on particular suppliers, more information could be shared with them, more robust relationships developed and more strategic discussions attempted.

Summary & Recommendations for Action:

You might at this point want to check out the Knowledge Hub operated by Future Purchasing Procurement Consultants. that has a wealth of important info.

Having a high quality “Procurement Ready” knowledge base, establishing a highly effective category strategy is quicker and easier. The likelihood of successful transformation programmes are raised as a result. A ‘Procurement Ready’ base of knowledge is one of the differentiators between Category Management Front-runners and Followers and contributes to the 46% additional savings which Frontrunners benefit from versus Followers.

In order to start using a “Procurement Ready” base of knowledge it is recommended that a standardized model is created and then properly trained to ensure that a vocabulary is established throughout the procurement team.

One other development we have witnessed, from foremost companies, is to build a specialist function within the purchasing team specialising in creating this data ,liberating the category management team to make use of the knowledge for their strategic thinking.

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

Ignoring Category Management in modern day procurement departments is no longer an option and should be prioritised.

Multi-site businesses in the private sector and large gov departments inside the public sector need to have “one method of working” effective at unlocking value in a very quick and flexible way. For alternative interpretations, consider checking out: intangible. Adopting the process above will bring about an organizations step change in delivering value. Selecting a procurement consultancy that can help you through the entire process is often the easiest way to go and avoiding the numerous pitfalls out there..
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