Category management is about segmenting supply markets to optimally formulate sourcing and supplier management processes to drive savings and other financial rewards. But what about managing the other side of reward — risk? Well, category management can do that too, and to illustrate this, consider the Kraljic Matrix, circa 1983, which plots supply categories against two dimensions: supply impact and supply complexity.
Category Archives: Category Management
Spend Matters welcomes this sponsored article from Trista Hannan, senior vice president of client solutions at Eved.
Each year, finance and procurement professionals are met with the same challenges and pressures — save money, reduce risk and improve efficiencies. Your meeting and event category may just be the diamond in the rough that can help you achieve significant wins in each of these areas.
Spend Matters welcomes this guest post from Avotus.
CIOs and other executives are well aware of the fact that the IT and telecom infrastructures within their organizations are growing at an exponential rate, and access to clean, current and accurate inventory is essential. Yet, how do you optimize IT infrastructure for the firm if you don’t have the tools to accurately capture data and gain visibility into all that a CIO is expected to manage? New users — new network connections and hardware — are introduced constantly. Conversely, circuits and assets are disconnected regularly, yet many continue to be billed to clients. Management of these components and associated charges is imperative to efficiently managing costs and obtaining visibility. Currently, much of IT asset management (ITAM) cost reconciliation and allocation is performed manually using spreadsheets with “rear view” information, which does not provide organizations with timely actionable business intelligence.
A new report from Concur shines light on just how much last-minute business travel is costing companies and provides evidence for how organizations can save money when travel policies and travel management technology solutions are adopted and monitored. Travel and expense management solution provider Concur parsed through data from roughly 22 million U.S. domestic round trip airline bookings made through its travel solution between 2011 and 2015 to identify some key areas businesses can focus on to reduce costs.
In the first part of this series, we introduced category management, which is much more than just grouping products into categories and category sourcing. Proper category management, we concluded, is a strategic approach to managing supply that transforms the procurement organization from a cost saver to a value generator using advanced strategies and workflow processes that connect external customers to internal customers and collect all of their requirements, connect internal customers to sourcing and work with them to develop the best strategy for the category, as well as connect sourcing to downstream procurement to make sure the contract, and the execution plan, is followed and the identified value retained. And that's just the beginning. That's why, in our last article, we defined some of the many facets of modern category management, which some may call category management 2.0, in an effort to illustrate that proper category management is not a one-size-fits-all process or strategy but an evolving strategic mindset that takes into account the organizational needs, market conditions and results of the category analysis and adapts to provide the organization with the best overall value each time the category is sourced. We also talked about the multidimensional nature of modern categories, the need for customization on a category basis and category intelligence. But even though these are pretty advanced approaches, they are still simple compared with where a modern sourcing organization needs to go. In this article, we explore a few of these (advanced) approaches.
In the first part of this series, we introduced category management, which is much more than just grouping products into categories and category sourcing. Proper category management, as we concluded at the end of the article, is a strategic approach to organizing activities around supply that transforms the procurement organization from a cost saver to a value generator using advanced strategies and workflow processes that connect external customers to internal customers and collects all of their requirements, connect internal customers to sourcing and works with them to develop the best strategy for the category, and connect sourcing to downstream procurement to make sure the contract, and the execution plan, is followed and the identified value retained. And that's just the beginning. In this article, we define some of the many facets of modern category management, which some may call “category management 2.0,” as we illustrate that proper category management is not a one-size-fits-all process or strategy but an evolving strategic mindset that takes into account the organizational needs, market conditions and results of the category analysis and adapts to provide the organization with the best overall value each time the category is sourced.
Category management is broader than strategic sourcing. For example, while strategic sourcing has been a useful methodology for procurement to proactively rationalize the supply base in recurring spend categories, the traditional strategic sourcing methodology has had a strong bias toward purchase price reduction to meet savings goals, because despite all of the talk about the importance of sustainability and supplier development, procurement is still predominantly measured on purchased cost savings rather than a truly balanced scorecard of supply that optimizes the total value of the purchase. As a result, chaining category management to traditional strategic sourcing shrinks its scope to within the sourcing silo and limits its ability as a methodology for broader organizational value creation. The goal of this series is to explain what category management is, how to best go about it, how it intersects with strategic sourcing and how it can be used to take an organization's sourcing efforts to the next level.
This is your last chance to register for this morning's webinar on How Eli Lilly & Company Achieved Visibility Through Event Category Transformation. Beginning at 10 a.m. CST, Pierre Mitchell, chief research officer at Spend Matters, will join Roberto Ramirez, sourcing consultant, Eli Lilly & Co., and Talia Mashiach, CEO, founder and product architect, Eved, for a brief, 30-minute discussion on event procurement and sourcing. Register before time runs out!
Complicated: Event procurement and sourcing. Not complicated: Attending our 30-minute webinar, Event Category Spend: Early Lessons Learned From Eli Lilly and Company, on Wednesday, Feb. 10, at 10 a.m. CST, with Pierre Mitchell, chief research officer at Spend Matters, Roberto Ramirez, sourcing consultant, Eli Lilly and Company, and Talia Mashiach, CEO, founder and product architect, Eved.
Our experience across procurement and supply chain design and engineering teams leads us to suggest that we can effectively segment the tools in the market into categories in a way that provides little overlap between each of the areas, at least today. In this post, we define and briefly describe six major solution areas before getting into specifics in our next posts. It is likely if your company is in the manufacturing business, or works with contract manufacturers to produce its products, that there are elements of solutions in each of these areas that you’ll be able to call upon as you consider your direct materials sourcing procurement capabilities and solution architecture. Just be sure not to ignore the touch-points between the various toolsets — not to mention integration with ERP/MRP, CAD/PLM, inventory/supply chain systems, supplier systems of record and third-party data enrichment, when available and applicable.
Direct materials sourcing refers to the sourcing of custom manufactured goods, and of course, raw materials from first tier suppliers that meet the particular needs of the buying organization. It is distinct from the sourcing of commodity goods and services in that the nature of the requirements are considerably more detailed than the requirements for consumables or low-value goods. If all you are buying is toner cartridges for the laser printers, cleaning suppliers for maintenance or commodity packaged goods to round out the low end of a product line, any compatible toner cartridge, cleaning detergent or aftermarket good will cut the mustard. But if the organization is buying components for a high-end laptop, looking for custom molded manifolds or building engines, the goods have to be precise. Sourcing these goods is considerably more complex than sourcing toner cartridges and detergents.
Marketing is all about generating demand for the organization’s products. Thus, value to marketing is any activity that has the potential to increase demand. The primary activity marketing undertakes to increase demand is advertising. This activity is primarily accomplished through contracting agencies with the creative talent (the “magicians”) that marketing believes has what it takes to produce the magic that will increase demand with the fresh and innovative campaigns and messages these creative types will generate. Thus, a big part of marketing is agency management. Often the greatest value that procurement can bring marketing, at least in marketing’s view, is any process, methodology, technology or resource pool to help marketing better manage its agency relationships. If marketing already thinks those relationships are good, procurement can still help foster more successful agency relationships. How will procurement accomplish this? In this installment of our six-part Spend Matters Plus series, we take procurement practitioners through how to clarify and pitch the value message of certain management processes for marketing, ultimately helping marketing close the loop between what was created and what was delivered.