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Category Management Necessities for Procurement Organizations We've frequently looked at the fundamental info and knowledge to which Category Managers need to have access. for example, supplier spend, category spend along with individual business unit spend -- there's a decent example mapped out below. Suprisingly perhaps when most people come to try to find this kind of information, it can be difficult to locate. Yet, it’s absence is undoubtedly recognized and reported by the Category Managers that must have fun playing ‘Spreadsheet Detective’ in an effort to manually bridge the information gap! At the moment we are switching the focus to a 2nd level connected with category knowledge that has in no way found itself written about or codified so far as we are informed. Tier Two is more specialised information that will differ according to the profile of the category and the potential value that might be achieved simply by building on the data and knowledge out of Tier One. Your time and effort to acquire this data however can be worthwhile since the information gained may be of a extremely high value. The main importance of comitting to the additional effort is gained whenever negotiating with suppliers because the information obtained will give useful insight to costs and determine the opportunity to pursue a reduction or add value sufficient to provide a transformation to the relationship with the supplier furthermore making management of them much simpler. Types of Tier 2 Category Specific Information The Top Ten different types of data sought after by Category Managers 1. Breakdown the Cost Purchase Price Cost Analysis (PPCA - an alternative term for “cost breakdown” is considered the job associated with identifying the major factors that constitute every particular cost from a supplier for the service (or product). By calculating the Percentage share of the supplier’s total price that's going to be attributable to each and every cost element, comparisons can be done across suppliers. Of course, using this method also prevents making assumptions and helps to understand not just what makes up almost any particular cost but also exactly what drives it. For example, wherever logistics is definitely a high percentage of the total cost price then a rise in oil prices will definitely affect the overall cost. 2. Understanding Technical specs While looking for cost savings from a supplier, this type of categorisation approach is a massive help. However, when discovering potential opportunities during the creation of a category strategy, it's important to review spend in more detail. This involves the assessment of the specific part numbers as well as services bought, determining the specs and/or performance behind them and linking these to the relevant costs and amounts. When successfully completed, analysis of the data to determine value can be done. For instance, this can be linked to the overall performance specification for part numbers of electronic components, departure times for identified air travel sectors, or the addresses of high street network branches receiving alarm system reactive maintenance. 3. Finished Product Cross-fertilisation This requires an awareness about which sub-categories provided by the supplier are used in which end products provided to customers and then making this visible to the supplier. Use this in order to encourage suppliers to provide the best pricing and/or new developments, so that they feel instantly connected with business development with the end customer and can influence the demand for their own products and services. 4. Unitisation amp; Benchmarking Breaking costs right down to the single unit helps you set a benchmark value. Spend is simply divided with a variable which is relevant such as height or customer feedback. In this manner numerous suppliers can be evaluated alongside one another and differences identified. The next thing is to discover the factors behind the variances, eradicate all damaging practices and promote the good practices that result in lower costs across the organization. An example well worth sharing is how the total cost for every retail outlet of marketing spend led to regional accents being used for radio ads. 5 Operations Data Overlay Getting a substitute product or service that directly compares with the previous one is very easy to validate in terms of price difference. Unfortunately, where the alternative has got a different anticipated overall performance, the verification associated with a pricing variation is more challenging. This is why the overlay of operations information may well enable a total cost of ownership (TCO) analysis to take place and many more complex opportunities and associated cost differences validated. For example, these total cost opportunity situations can occur if a new compound is used that is twice as efficient as the previous one, or where a modern oil filtering system for a car or truck is claimed to be able to last x miles further before replacement, compared with the current filtration system. Modelling Knowledge in Procurement In every case category managers will want to give some thought to which value levers can potentially present new kinds of business opportunities for the purpose of getting additional benefits and what kinds of ‘Procurement Ready’ information can help to identify and quantify these potential opportunities. The Supply Chain Footprint Arranging all your suppliers on a map to indicate their location is the 1st step to undertake while creating a footprint. Navigate to this URL click for procurement training to study the inner workings of this thing. The next phase is to map more levels of the supply chain and linked production addresses. Pinpointing all these locations ensures that major supply chain risks are able to be managed including assurance of supply; reputation and ultimately, business oriented costs. 6 Revenue amp; Profitability Overlays Discovering areas where procurement people will be able to improve cost prices and/or sales revenue throughout the course of category reviews is required practice. Identify further on this related web resource - Hit this website procurement consulting. Instead of focusing on the buying price of specific part numbers or sub-categories, the price of these are grouped together around a consumer end product or service. At this stage individuals from various other business units are generally important in helping to validate opportunities to help reduce cost. One of the best advantages however as a result of working across most different categories is that many more opportunities are exposed to the category buying teams. 7. The Suppliers View on Data Measuring a supplier relationship can be carried out both internally in the organization but also, most importantly by the suppliers theirselves. Doing this could very well flush out where things are going both well and not so well. It helps to determine exactly how significant the business is as a customer to the supplier. Questions you should ask will include How well do the strategic activities of all parties align? How effectively does the relationship work? Is the business relationship properly providing the benefits required by the business? Have any business opportunities not been identified? If you have this level of detail at your disposal and clearly linked to the relevant categories, improvement opportunities can be made visible, integrated in category strategies and executed. 8 Overlaying Market Data Passing up important market data such as futures trading prices would likely clearly be a error in judgment. This could be because the organization is directly purchasing the commodity in question, or maybe it's a key component in a supplier’s cost base and the organization ought to maintain a record of changes in that cost base. 9 Consumption Profile This is beneficial to understand if the business has got an end consumer demand profile which isn't flat, and varies during the year. When mapping this demand profile and thinking about its affect on specific suppliers, more information could be given to them, much better relationships produced and more strategic negotiations attempted. Summary amp; Recommendations for Action You might at this stage like to investigate the Knowledge Hub operated by Future Purchasing Category Management Training Consultants. which has a wealth of insight. Using a higher quality “Procurement Ready” knowledge base, creating a strong category strategy is quicker and easier. As a result this builds increased momentum for procurement transformation. A ‘Procurement Ready’ base of knowledge is among the differentiators between Category Management Front runners and Followers and results in the 46 additional cost savings that Business leaders enjoy versus Followers. So that you can implement a “Procurement Ready” knowledge base it is recommended that a standardized process is developed and also properly trained to ensure that a language is established across the purchasing team. Another development we have seen, at leading organizations, is to create a expert function inside the purchasing team specialising in providing this data ,freeing up the category management team to use the information for their strategic thinking. Prioritising the requirement for a Knowledge base is fundamental to being successful and must be designed and prioritised in order to really transform ways of working. Making category management a primary business competence of modern procurement teams should be a main priority. Multi-site companies in the private sector and large gov departments in the public sector require “one way of working” effective at unlocking value in a very quick and flexible manner. Following the process above will bring about an organizations step change in providing value. Discover new resources about procurement consultants by browsing our stylish link. Choosing a procurement consultant to help you through the process is generally the easiest way to go and avoiding the many hurdles out there..