Monday 10 February 2014

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 AMR Research and Gartner:

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, 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.

3. Supplier Market Intelligence – number of suppliers in the market, supplier segmentation within the category, supplier’s strategic direction for the next 5 – 10 years, 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, and collaboration strategy.

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

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 road maps 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

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

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

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