Category Management Presentation by Dave Porter

Consultancy Negotiation Skills Development Recruitment Interim Management Asia Sourcing
PMMS Consulting Group 2011 All Rights Reserved www.pmms-group.com

CIPS South Wales Branch
Category Management
Presented by:
Dave Porter
History of Category Management
Originated in marketing in the 1980s.
Grouped products into categories based on how the consumer
used the product e.g.
Rekitt Benkiser products/brands are distributed across 8
categories
Fabric care 22%
Surface care 17%
Dishwashing 11%
Home care 14%
Health care 13%
Personal care 13%
Food 3%
Pharmaceutical 7%
Reckitt Benkiser Brands & Categories
8 Category Groups & Revenue Share
19 Power Brands
Each ranked 1 or 2 worldwide
75% of net revenue
Finish
Lysol
Dettol
Vanish
Woolite
Durex
Calgon
Airwick
Harpic
Bang,
Mortein
Veet
Nurofen
Clearasil
Strepsils
Gaviscon
Mucinex
Scholl
Frenchs
History of Category Management
Originated in marketing in the 1980s.
Grouped products into categories based on how the consumer
used the product e.g.
Rekitt Benkiser products/brands are distributed across 8
categories
Helped retailers grow sales and profit by maximising synergies
and minimising unproductive competition between their own
brands and products. For example:
Michelin also manufacture Kleber tyres which are marketed
as a high quality (Michelin connection) budget brand (price
connection) tyre thus securing market share in 2 segments.
Adapted and adopted progressively by procurement functions
What is Procurement Category
Management?
Category management is a process which relies on cross functional teamwork
to generate procurement outcomes that fully satisfy agreed business needs.
Categories group products and services together based on the ability of
the market to supply not on the basis of organisational boundaries.
BUT - this has been the goal of the procurement profession for many years
what is so special about category management?
Extent of engagement and teamwork with stakeholders for all expenditure
with suppliers.
Not simply allocating categories/commodities to procurement team members
Governance process which crosses organisation boundaries.
Depth of category specific knowledge and expertise market & technical.
Emphasis on planning and use of analytical tools.
Agreement/Contract
Need
Specification
Enquiry
Re-active
Expediting
Problem Solving
Receiving Inspection
Excessive Contract
Supervision
Storing Invoice Matching
Handling Emergencies!
Upstream
Downstream
Available
Resource
(time)
20%
80%
The Planning Issue
$210m (24%) extra
Scope Growth, Claims, Variations,
Use of contingency
Poor post-contract mgt etc
$880m
Approved
Contract Value
$880m
Contract Value
The organisation was leaking like a
sieve!
Agreement/Contract
Receive Goods
& Services
Pro-active
Supplier Management
Tender Improvement
Business Objectives Strategic Plans
Supply Planning Contract
Strategy
Market Analysis Negotiation
Manage
Performance
& Pay
Upstream
Downstream
Available
Resource
(time)
80%
20%
The Planning Solution
Category Management helps invert the triangle
How does category management work?
Category tree extends to the level at which the organisation is likely to buy.
Category Management Structure 2009/10
Social Care
(83.4m)
Transport & Facilities
Management (59.8m)
Construction and
Special Projects
(62.5m)
Environment (54m)
People and
Professional
Services (33.5m)
Corporate & ICT
(34.7m)
Residential Homes
(18.77m)
Transport Service
And Materials
(10.6m)
Buildings and Civil
Construction
Projects (61.4m)
Building Maintenance
Services (30.3m)
Agency (13.1m)
Office Consumables
& Services (3.62m)
Property Leases &
Accommodation Service
(7.9m)
Marine Services
(1.16m)
Highway Maintenance and
Construction (4.66m)
Advertising, Print, Design
& Post (4.16m)
Catering (6.47m)
Leisure and Other
Facilities (779k)
ICT
(11.67m)
Utilities and Energy
(11.6m)
Waste Management
(5.4m)
Books and Publications
(1.04m)
Facilities Maintenance
(1.78m)
Events (8.55m)
Domestic Furniture &
Equipment (915k)
Cleaning (1.25m)
Professional Services
(12.99m)
Consultancy (7.49m)
Building Materials
(3.02m)
Highways Materials
(2.26m)
Parks and Ground
Maintenance (3.54m)
Plant, Tools, Equipment
and Services (2.07m)
Schools Supplies &
Equipment (4.73m)
Traffic and Telematics
(1.95m)
Domiciliary Care(18.6m)
Supported Living
(14.94m)
Nursing Homes
(10.63m)
Supporting People
(3.49m)
Fostering Services
(8.6m)
Other Adults Services
(3.14m)
Other Childrens Services
(2.77m)
Substance misuse
(2.45m)
Passenger Transport
Services
(19.9m)
SOCIAL & PEOPLE ENVIRONMENT CORPORATE
Cardiff Council
Category Structure
(extends to level 3 sub
categories)
Edinburgh City Council
Commodity/Category Structure
Learning and
Care
Corporate
Indirect
Environment ,
Transport & Trades
Construction &
Consultancy
Exempt
L1 Sub
Categories
L1 Sub
Categories
L1 Sub
Categories
L1 Sub
Categories
L1 Sub
Categories
L2 Sub
Categories
L2 Sub
Categories
L2 Sub
Categories
L2 Sub
Categories
L2 Sub
Categories
Commodity Structure
Environment, Transport & Trades
How does category management work?
Category tree extends to the level at which the organisation is likely to buy.
A Category Manager develops a Category Plan in conjunction with one or more
service lines for procurement of the products or services within the category.
Categories may cross service lines e.g. legal services or desk top IT.
Alternatively, a category may be an essential component in the delivery of a
single service e.g. childrens care services or vehicle transmission systems.
The Category Plan gathers all relevant data to identify, quantify and prioritise
improvement opportunities in conjunction with service lines/stakeholders.
Sub Commodity (incl L1 where invoiced directly) Spend
Care Services 24,430,228.35
Las Agencies & Other Bodies 17,182,613.96
Uncategorised 13,779,485.01
Publishing 10,566,345.10
Utilities 10,294,622.01
Charity 8,417,679.13
Building Contractors 6,741,115.04
Community Groups 5,873,978.45
Recycling 5,043,594.86
Construction 4,718,777.35
Consulting Engineers 3,657,616.07
Staff Training 3,542,526.85
Health Care 3,240,109.74
Training Services 2,624,570.31
Consultants 2,513,996.63
Financial Services 2,306,458.56
NHS/Health Board 1,983,075.50
Clothing 1,953,417.68
Facilities 1,918,545.80
Plant Hire 1,834,079.16
Lights 1,601,897.63
IT Hardware & Software 1,544,424.24
Taxis 1,491,135.17
Vehicle Sales 1,441,703.78
Furniture 1,403,641.01
Educational Services 1,384,859.43
Fuel 1,368,003.99
Telecommunications Provider 1,361,794.90
Concrete Products 1,303,213.57
Solicitors 1,154,833.46
Security 1,080,304.72
Office Equipment 963,919.93
Vehicle Rental 942,590.05
Electrical Contractors 911,048.72
Blacksmiths 897,275.90
Landscapers 896,454.72
Asphalt & Tar Products 805,952.45
Highest spend 37 (9%) sub commodities from a total of
405 sub commodities account for 80% of total spend
90% of spend on 19% (75 No) of sub commodities
The Tail
Most are low value and relatively straightforward to
procure but some are high value and complex. The
Category Management process must accommodate
both.
Understanding
Spend is Crucial
PMMS 2011
Risk
% of Total Expenditure
0.3%
TACTICAL ACQUISITION TACTICAL PROFIT
STRATEGIC SECURITY STRATEGIC CRITICAL
The Process Must Also Take Account of Risk
(150k pa)
6m pa
Building Products
Steel Pipe
Ductile Iron Pipe
Pipe Fittings
Plant Hire
Standby Generators
HV Switchgear
Penstocks
Steelwork
Pressure Vessels
Misc Tanks
Mech Plant
Fabricated Plant
Filter Media
Mech Installation
Chemical Dosing
General Civil Subs
Specialist Civils
Subs e.g.Piling
General Elect Subs
Process Plant
General Piling
GRP Building
Kiosks
Filter Nozzles
Only influencable spend > 150k is positioned
Low value spend 2m
(21m)
(12m)
Category Management Process
Key Components
Establish
team &
governance
structure
Gather data &
analyse -
internal &
market
Identify &
quantify
opportunities
Develop
procurement
strategy
options
Implement
preferred
procurement
strategy
Category plan identifies all
opportunities within a
category along with the
anticipated means of
achievement. For simple
procurement, it may also
define the procurement
strategy.
Low value simple procurement may simply involve
implementation of the conclusions of the category strategy
e.g. use a collaborative framework/contract, change the
specification and re-negotiate terms.
More detailed investigation is required for high value
complex procurement. This is often referred to as
Strategic Sourcing or Procurement Strategy.
Comprehensive category plans addressing all sub
categories
Specific strategy for procurement
of one or more sub categories
Strategic Sourcing Process & Tools
Establish multi-functional team
Understand current supply arrangements
Strategy Development
Preferred Procurement Strategy
Implementation
Contract Management
Review
Membership
Clear Objectives
What is being purchased,
why and how
Existing Suppliers
What works well
Problems/issues
How the market works
Suppliers
Capabilities
Trends & Developments
Tools:
Supply Positioning
Supplier Preferencing
Supply Chain Analysis
Vulnerability Analysis
Financial Analysis
Strategy Analysis
What the business really needs
Technical/Functional Spec
Confirm Business Needs
Option Analysis
Business Needs
Market Analysis
Select preferred Option
Implementation Planning
Detailed Business Case
Endorsement to implement
RFP / RFQ / Negotiation
EU Procurement Process
Select Procedure
Selection & award criteria
Contract Notice
Supplier selection
Tenders and assessment
Negotiation plan where
appropriate
Contract documentation
Contract management plan
Contract award
Delivery Management
Relationship Management
Contract Administration
Continuous Improvement
Lessons learnt
Category Management and Strategic Sourcing
Identify Develop
Spend Data
Confirmation
of Scope
Initial
Stakeholder
Engagement
Questionaires
Interviews
Intro to
Category
Insight Report
Opportunity
Analysis
Milestone Plan
Category
Development
Plan
Form cross
functional
team &
confirm scope
Category
Analysis
Market
Analysis
Business
Needs
Analysis
Analysis
Summary &
Conclusions
Strategic Option
Generation,
Evaluation &
Selection
Risk &
Contingency
Planning
Strategic
Option
Definition
High Level
Implementation
Plan
Sourcing
Strategy Sign
Off
Workshop 1 Workshop 2 Workshop 4 Workshop 3
Gather Category
Information
Opportunity
Analysis
Category
Development
Plan
Initiation
Business Needs
&
Market Analysis
Strategic Options
Category Management Process Flow
STP
Spend/Supplier Analysis
Demand/Supply Analysis
Current process
Stakeholder
Analysis
Business Needs
Analysis
PESTLE Analysis
Porters Five Forces
Trends & developments
Supply chain & vulnerability analysis
PPCA cost drivers
Portfolio Analysis
Supplier analysis incl Preferencing
Market Management Matrix
Kick Off Off Line Analysis
SRO Sign
Off 1
SRO Sign
Off 2
SRO Sign
Off 3
SRO Sign
Off 4
Stage 1 Stage 5 Stage 4 Stage 3 Stage 2 Stage 6 Stage 7
Strategic Sourcing Strategy
Communications Plan
Governance
Cat Man and
Service
Strategy
Category Grid
Initial
Stakeholder
identification
Responsibility
Opportunity
Plans
Category
Insight Report
Sustainability
Assessment
Governance
Face 2 Face
In how many ways can we organise
procurement?
Centralised
De-centralised
CLAN or matrix management
Devolved
Commodity teams
Collaborative
Informal networks
Formal consortia
Informal consortia
Mandatory & non mandatory
Agency arrangements or
outsourced service
There is no right answer choice of
organisational model depends on
the nature, culture and needs of
your business.
Category management can be
accommodated within any of these
organisation models.
What is the impact on organisation
structure?
Procurement teams reflect defined categories.
Category Based Structure Single
Organisation
GSC Director
Head of Supply
Chain
Change Project
Leader
PA
Head of Supply
Chain
Head of Supply
Chain
Communications
Leader
Head of Product
Category
Head of Product
Category
Product Teams
Construction Account Mgt 2
Baggage Systems 2
Infrastructure 1
Fit-out 3
Consultants 4
Baggage Operation 3
Shell & Core 3
Building Services 3
Total 21
Product Teams
P2P Process & Systems 7
Lifecycle Mgt Process 1
Total 8
30
Product Teams
IT & Telecomms 8
Mkting & Business Services 5
Cleaning 2
Total 15
16
Airport
Logistics
25
Travel &
Transport 4
Maintenance Facilities
Maintenance
4 4
Support Pool 4
88
Utilities
Sustainability Mgt
16
Supply Chain Development
Supply Integration/CRM
Risk & Governance
21
1
1
129
structure?
Procurement teams reflect defined categories
Category teams are multi functional
Procurement is a member of the team normally the category manager
Other team members will include representatives of the services who will be
strongly affected by the outcome plus those with relevant specialist expertise.
Governance arrangement must ensure endorsement and ownership at an
appropriate level
Service lines must remain accountable for their service
Category Management and Strategic Sourcing
Identify Develop
Spend Data
Confirmation
of Scope
Initial
Stakeholder
Engagement
Questionaires
Interviews
Intro to
Category
Insight Report
Opportunity
Analysis
Milestone Plan
Category
Development
Plan
Form cross
functional
team &
confirm scope
Category
Analysis
Market
Analysis
Business
Needs
Analysis
Analysis
Summary &
Conclusions
Strategic Option
Generation,
Evaluation &
Selection
Risk &
Contingency
Planning
Strategic
Option
Definition
High Level
Implementation
Plan
Sourcing
Strategy Sign
Off
Workshop 1 Workshop 2 Workshop 4 Workshop 3
Gather Category
Information
Opportunity
Analysis
Category
Development
Plan
Initiation
Business Needs
&
Market Analysis
Strategic Options
Category Management Process Flow
STP
Spend/Supplier Analysis
Demand/Supply Analysis
Current process
Stakeholder
Analysis
Business Needs
Analysis
PESTLE Analysis
Porters Five Forces
Trends & developments
Supply chain & vulnerability analysis
PPCA cost drivers
Portfolio Analysis
Supplier analysis incl Preferencing
Market Management Matrix
Kick Off Off Line Analysis
SRO Sign
Off 1
SRO Sign
Off 2
SRO Sign
Off 3
SRO Sign
Off 4
Stage 1 Stage 5 Stage 4 Stage 3 Stage 2 Stage 6 Stage 7
Strategic Sourcing Strategy
Communications Plan
Governance
Cat Man and
Service
Strategy
Category Grid
Initial
Stakeholder
identification
Responsibility
Opportunity
Plans
Category
Insight Report
Sustainability
Assessment
Governance
Face 2 Face
structure?
Procurement teams reflect defined categories
Category teams are multi functional
Procurement is a member of the team normally the category manager
Other team members will include representatives of the services who will be
strongly affected by the outcome plus those with relevant specialist expertise.
Governance arrangement must ensure endorsement and ownership at an
appropriate level
Service lines must remain accountable for their service
Collaborative arrangements
Consortia may be organised around categories
Can be challenging when decision making authority does not cross
organisational boundaries
Particularly problematic for direct areas of spend i.e. when service line
success depends on the quality of the category plan & sourcing strategy
Collaborative Consortium
User Intelligence Group signs off category allocation, sourcing scope and strategy
Implementation and Benefits Delivery
Establish
team &
governance
structure
Gather data &
analyse -
internal &
market
Identify &
quantify
opportunities
Develop
procurement
strategy
options
Implement
preferred
procurement
strategy
Sourcing Programme
Management of frameworks &
contracts
Programme and project
management infrastructure
and expertise
Delivery
Management
Relationship
Management
Contract
Administration
Continuous
Improvement
Aiming for improvement over the
life of the contract. May include
incentive mechanisms.
Handling the formal governance of the
contract e.g. change control, cost
monitoring, payment, management
reporting etc).
Building open and constructive
relationships that enable problems to
be identified and resolved early.
Ensuring that the contract is delivering
what has been agreed to the required
performance standards.
Benefits of Category Management
Closer and more constructive relationship with service lines and stakeholders
Enables productive procurement engagement without compromising service
line ownership of strategies and outcomes.
Focuses attention on the planning phase which offers the greatest scope for
improved performance and ground breaking solutions
Provides the toolset and process to support a strategic approach to
procurement and helps create a supportive environment
Enables realistic targeting of savings and other benefits which are agreed with
and owned by service lines.
Minimises off contract spend through service line engagement, ownership and
sign off
Enhances procurement capability within the procurement function and across
the organisation
Are there any risks or disadvantages?
Narrow focus on categories may obscure interdependencies and associated
cross category opportunities
Interdependence & Missed Opportunity
Professional
Services
Construction
Services
Maintenance
Services
Planning Design Construction Maintenance Usage
Fin/Econ
Engineer
Architect
Estates
QS
Engineer
Architect
QS
H&S CDM
M&E
Architect
Engineer
Contractor & Sub Contractors
H&S CDM
QS
H&S CDM
Prof Services
M&E
Trades
Value
Chain
Engineer Architect QS H&S CDM
M&E
Aggregation &
Standardisation Opportunities
Integration & Standardisation Opportunities
e.g design, build and maintain
S
u
p
p
l
y
C
h
a
i
n
s
Sub categories
excluding
professional
services
S1 Sn M1 Mn
Category Tree
What risks do we need to manage?
Narrow focus on categories may obscure interdependencies and associated
cross category opportunities.
Overly optimistic view of current skills gaps.
Heavy workload initially but this diminishes significantly once category plans are
approved and sourcing is underway.
Law of diminishing returns reduces savings opportunities over time and
political direction may change.
Pursue savings and other benefits
A narrow category focus could be career limiting in organisations which need
staff with broad experience and expertise.
Loss of local expertise where categories are assigned to collaborative
arrangements.
Too much emphasis on process and too little on outcomes.
Pre-requisites for Success
A need for improvement
Visible top level support categories cross organisation boundaries
Change management expertise not just procurement and project expertise
Establish acceptance of the need for change
Clearly set out and sell the category management approach
Gain stakeholder understanding, support, engagement, participation and
ownership of outcomes
Build procurement capacity and capability in parallel with the category
management process
Achieve quick wins and build credibility
Maintain the stamina and determination to bounce back from setbacks
Progress to more complex procurement
Share the gains and the pains
Remember that procurement supports service delivery
For more information on
Category Management or Strategic
Sourcing
please contact
dave.porter@pmms-group.com

Category Management Presentation by Dave Porter

Caricato da

Informazioni sul documento

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

Category Management Presentation by Dave Porter

Caricato da

Copyright:

Formati disponibili

Consultancy Negotiation Skills Development Recruitment Interim Management Asia Sourcing

PMMS Consulting Group 2011 All Rights Reserved www.pmms-group.com

Potrebbero piacerti anche