The most vital info and numbers essential for people employed as Category Managers might be written about a million times, examples include, supplier spend, category spend and also individual business unit spend -- there"s a good illustration mapped out in the following paragraphs. Suprisingly maybe when most people come to try to find this kind of info, it can be difficult to find. Category management specialists can be heard ripping their hair out wrestling with overworked or simply under prepared records of many differing types to find the data they should have to complete a full picture of the categories situation.
Right now we"re switching our attention to a second tier of category knowledge that"s not ever been written about or codified as far as we"ve been informed. Tier Two is more specialist information that will differ depending on the profile of the category and the potential value which may be obtained by simply building on the facts and knowledge out of Tier 1. The time and effort to extract this kind of knowledge however is definitely worth it as the data obtained can be of a extremely high value.
In most cases this leads to far more informed negotiations, much better cost management, greater capture of company innovation and pinpoints further opportunities to get value enhancement.
Top 10 ways Procurement People take advantage of category data
We have identified 10 types of Tier 2 category specific data:
1 Breakdown the Cost: Purchase Price Cost Analysis (PPCA - another name for "cost breakdown" is considered the process associated with identifying the main factors that make-up every distinct cost from a provider for their service (or product). By simply calculating the % share of the supplier"s price that"s going to be attributable to each cost element, comparisons can be done across suppliers. This refreshing buy procurement consultants
wiki has a few great suggestions for the meaning behind this idea. Obviously, using this method potentially helps prevent making assumptions and will help to recognise not only what makes up almost any particular price but also what normally drives it. As an example, wherever logistics is definitely a high % of the total cost price then a increase in petroleum prices will definitely impact on the total price.
2. Understanding Specs: While looking for savings from a supplier, this kind of categorisation technique is a massive help. A part of the category strategy ought to go into significantly greater depth in order to find cost reduction opportunities which needs to be scheduled as part of the whole process. Identify more on a partner link by clicking study procurement consultant
. This requires the analysis of the specific part numbers or services bought, determining the specifications and/or performance behind them and linking all of them to the related prices and volumes. When successfully completed, analysis of the data to determine value is possible. For example, this could be linked to the overall performance specification for part numbers of electric components, departure schedules for identified air travel sectors, or even the addresses of high street network branches receiving alarm system reactive maintenance.
3 End Product Linkage: To understand what products connect to other products (or services) used by end consumers the particular suppliers sub-categories must be matched with the finished item. This can be used to encourage suppliers to offer the best pricing and/or new developments, so that they feel instantly connected with business development with the end consumer which allows them to influence demand for their own products and services.
4. Benchmarking and Unit Value: Unitisation is where spend information is divided by a relevant variable eg area, length, customer satisfaction etc. In this way different suppliers are able to be assessed against one another and differences identified. The next step is to discover the factors behind the variations, get rid of any poor practices and talk about the best practices which usually produce lower costs throughout the organization. One example of this method applied by ourselves, was the analysis of unitised total FM costs in every square metre throughout eighty depots for a English coach company.
5 Operations Data Overlay: Buying a alternate product or service which directly compares with the old one is easy to validate when it comes to price difference. However, where a replacement has a very different expected general performance, the verification of any price variation could be more problematic. Analysing the overall cost of ownership is achievable by using operations data files which as well as verifying pricing differences might also realise far more opportunities. An example of these advantages include circumstances such as in which a battery is identified as lasting for a longer period than the previous one or where a different chemical increases shelf life by 20% more.
6 Revenue & Profitability Overlays: By analyzing end product sales revenue and profitability overlays you"ll be able to find target areas where procurement activities will be used to support and / or improve current levels of income and profit. Rather than focusing on the price of individual part numbers or sub-categories, the expense of these are typically grouped together around a consumer end product or service. At this stage individuals from other departments are almost always crucial in helping to validate opportunities to help reduce cost. One of the best benefits however as a result of working across all different categories is usually that more opportunities are exposed to the category buying people.
7. The Suppliers View on Data Measuring the supplier relationship can be carried out both internally in the organization but also, most importantly by the suppliers themselves. Carrying this out could very well identify where things are running both well and not very well. To get other ways to look at it, consider checking out: procurement consultants
. The added benefit of learning how vital the organisation is to the supplier is also identified. Things to ask will include: How well do the strategic agendas of the two of you align? How successfully does the working relationship function? Is the relationship appropriately providing the benefits required by the organisation? Specifically what development business opportunities are readily available? If you have these details at your disposal and also plainly linked to the appropriate categories, improvement opportunities can be made visible, incorporated throughout category strategies and put into practice.
8 Overlaying Market Data: Bypassing important industry information such as commodity prices would clearly be a mistake. Tracking any changes in important areas such as these is really important both for cost reduction opportunities and for the good of the suppliers sales and profits.
9 Consumption Profile Anywhere seasonal demand profiles are present they have to be prepared for and analysed. This kind of empathic approach with suppliers aids your SRM (Supplier Relationship Management) as their particular demands are better understood and also prepared for.
Summary & Recommendations for Action:
There is information worth referring to on this topic by Future Purchasing Category Management Training Consultants. on their site.
Having a high quality "Procurement Ready" knowledge base, generating a robust category strategy is easier and quicker. The likelihood of successful change programs are raised as a result. A âProcurement Ready" base of knowledge is one of the differentiators between Category Management Business leaders and Followers and makes a contribution to the 46% extra savings that Frontrunners enjoy compared to Followers.
Making certain that every one of the category managers stick to the same exact method is vital and so the method must be mapped to guarantee consistency.
The most forward thinking businesses have champions of this approach whose duty it is to ensure that the procurement knowledge database is constantly up to date ,freeing up 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 has to be planned and prioritised so that they can really transform ways of working.
Making category management a central commercial competence of modern procurement departments should be a top priority.
Both public and private sector businesses must provide procurement kpi"s efficiently and competently. Learn more on this related link - Click here: procurement consultancy
. Following the method above will bring about an organizations step change in delivering value. A good procurement consultancy can be beneficial in saving time, energy and money whilst embarking on this type of journey and its highly recommended..
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