Wednesday, 23 January 2013

Tapping into the Spend Opportunity: Category Management Best Practices (Part 2)

Resources focused on spend visibility are typically focused on categories, with specific knowledge on particular categories that are the differentiators on category appraisal. For instance, transportation management may require lane visibility, TL (truckload) and LTL (less-than-truckload) knowledge, and carrier restrictions. All of these are part and parcel of a complete category management plan.

Many research firms have identified best practices for category management; here are eight from firms such as Aberdeen, AMR Research, and Gartner. These eight represent characteristics of high performing category managers:

1. Category Analysis – Definition of total spend for the company in last 3 – 5 years, projected spend for next 5 years; regions spend is sourced; number of suppliers (strategic and long tail identified); and why the category is significant to the business.

2. Business Position relative to Category – Competitive advantage or disadvantage the category brings to the business (revenue stream, demand/supply positioning, and the market).

3. Supplier Market Intelligence – number of suppliers in the market; supplier segmentation within the category; capabilities of each supplier in the past, current and future; supplier’s strategic direction for the next 5 – 10 years (based on your business requirements); supplier’s financial viability; performance; inventory positioning and abilities; business continuity plans; total contracts with your company and others; supplier’s products; markets served; competitor portions of business; innovative processes and patents; and collaboration strategy.

4. Customer Requirements – customer needs such as demand, sustainability, innovation, market, pricing, margins, etc.

5. Business Plan – company revenue plan tied to each category; number of suppliers needed to carry out the plan; investment strategy in the supply base and inventory to meet the objectives.

6. Supplier Strategies and Plans – innovation, financial, technology and business roadmaps for next 5 – 10 years (based on your business requirements).

7. External Benchmarks – market growth; percent of market share; opportunity to capitalise on the future: average percentage of savings per category of spends, etc.

8. Critical Visibility Elements – the nuances that make a category unique such as transportation lanes; print paper and presses; packaging types, cardboard, presses, and volume; and metals rolled, stamped, sheet or fabricated.

Without resources focused on the nuances of critical large spend categories, money can be left on the table.

1 comment:

  1. Having eight characteristics in category managers will make them to work efficiently that they strives hard for successful business.
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