Lecture 2 Category Management

Category Management
Direct Spend & Indirect Spend
Difference between Direct Spend & Indirect Spend
 Supplier Relationship Management
 Cost management
 Inventory management
 Use of technology
 Organizational setup
Introduction of Category Management Define requirements
Manage stakeholders
Develop category strategy
Establish strategy government
Manage performance
Trends and Key Challenges for Category Management Globalization
Shifting consumer behavior
Growing competition
Technological advancement
Innovation
Environment
Category Management and Strategic Sourcing in the Procurement Process
Relationship of Category Management and Strategic Sourcing
Differences between Category Management and Strategic Sourcing Scope
Goal
Requirement
Strategy
Tools
Outcome

Category Profile
 Key Activities
 Outputs
Key enablers of CM organization & structure
Learning/skills
Procurement processes
Strategic sourcing
People
Technology
How to facilitate successful CM supply model
Product
Purchasing operations
pricing
Spend Analysis
Introduction
 What benefit
 What do procurement teams always want to know: Category, Item, Vendor, Contract,
Payment
Logic flow of spend analysis
 Data
 Analytics
 Decision
 performance
4 phases of spend analytics assignments map, extract& get familiar
Assess & cleanse
Categorize &validate
Analyze &visualize
Output
Spend cube analysis category analysis
Cost center analysis
Supplier analysis

Analysis dimensions
 Total Spend and Supplier Overview
 Critical Few and Tail Spend
 Category Analysis – Overview
 Category Analysis – by Level 1 Categories
Spend saving and monitoring
 Visible in Accounting-cost reduction
 Not Visible in Accounting-cost avoidance
Example of spend saving
Case study-spend analysis
Strategic Sourcing
Six main steps in strategic sourcing category profiling
Supply market analysis
Sourcing strategy development
sourcing strategy execution
implementation
monitor and sustain
Category profiling
 spend analysis(example)
 category requirements collection
Supply market analysis
 supply market characteristics
 Porter’s five forces analysis
 Competition among potential suppliers
 Entry barriers
  Substitutes
 Bargaining power of your supplier to its suppliers
 Bargaining power versus your suppliers
 other analysis
 Market overview
 Market structure
 Cost drivers
 Supplier analysis
 example: MRO Market
 Porter’s five forces analysis
 SWOT analysis
Sourcing strategy development Kraljic Matrix
RFI/RFP Process
Cost transparency – Cost Modeling
Specification assessment–Complexity Management
Innovation leverage– Innovation Management
Procurement outsourcing
Sourcing strategy execution Supplier research
Typical supplier selection process and evaluation criteria
Evaluation of proposal suppliers
Implementation
 Option I: "Break point" introduction of new supplier
 Option II: "Determine gradual transition to new supplier
Monitor and sustain
 Supplier Performance Monitoring
 Supply Market Monitoring