In an effort to give out category management information, tips/tricks and insights, I’ve decided to create Category Management Monday’s! As hard as Monday’s are, we always can use quick read to ease into the work day!
For this week’s first update, I decided to go old school. The one, the only and the original from AT Kearney. And since a diamond is a girl’s best friend, what’s better than to bring up the Strategic Sourcing Gemstone (close enough, right?). This beauty was eventually updated to the AT Kearney purchasing Chessboard, but there is something about the simplicity of it that I really like.
The graphic alone is a lot easier to digest and take in than Chessboard. For one it’s not an eye chart and two, it doesn’t have an entire book dedicated to understanding it! So whether you are new to the trade, or want to introduce category management to a new business partner, it’s a great graphic to have in your arsenal.
Tip for the week: There are lots of uses for this old school sourcing tool! #dontforgettheclassics
Spend Analysis. Divide a cube of spend into nine pieces, (a three by three cube is easy to analyze). Look at each dimension, total spend and then by the other side. Summarize each side in ta separate slides and then consolidate to one. Who said this had to be hard?
See also: Rate Analysis Blog
Category Management Mondays
My first boss in GSS always told me that in our jobs in Category Management, we had a toolbox – part of the larger process. We always carry the ability to use all of these different tools. But it doesn’t always make sense to do so. It depends on the category, level of engagement and business partner. Each job requires only tools that make the most sense for it.
But it is a nice standardized framework to refer to. Especially when moving into new categories. Eventually I’d like to drill down into each of these tools and explain best practices.
Tip – Don’t try to use all the tools every time! Every Category is different and focus on the ones that are most relevant and useful.
What is an Opportunity Analysis? Well simply put it’s finding the best practices for finding value in a sourcing process (leveraging the gemstone/chessboard). It’s taking all the information you have: stakeholder interviews, brainstorming sessions, market data and benchmarking and reviewing them to analyze the need for process improvements and potential savings opportunities.
This may sound easy when you see it on the surface, but the truth is that it can be a very complex task. There are multiple factors you must take into consideration. There’s lots of data and information to review. So if you miss something or incorrectly prioritize something else, it can drastically change your strategy.
Tip(s) of the Week: Don’t let your past experiences, create your future ones. People rely on what worked well in the past, so kick old habits. Include new business partners in a brainstorm – create a hypothesis, test and repeat. Don’t rely on status quo.
Second, technology is constantly changing. Update your benchmarking, industry insights and market data in the least yearly (if not quarterly). You don’t want to miss an epic opportunity due to stale data.
Have you finished your opportunity analysis? If so, this week of Category Management let’s review this week on how to prioritize each opportunity based on the estimated savings potential and ease of implementation.
Steps to identify opportunities on the Prioritization Matrix:
1. Buy Market Research / obtain benchmark information on savings potential
2. Meet with business partners to review their budgets, potential sourcing opportunities and gauge their level of interest
3. Review the potential for bundling similar services/products for additional volume leverage (generally speaking if spend is <1M)
4. Map out estimated savings and ease of each opportunity to determine which opportunities should be addressed first and in what approximate order. Plot each below on the matrix by:
- Estimate savings and other cost avoidance/soft savings opportunities or benefits by using benchmarks, interviews, and past experiences
- Revisit notes from business partner meetings to estimate their willingness or “ease” of implementing each opportunity
Tip of the week: Make sure to print out the map you create and put it on your desk or somewhere you can visually see during the day. It will give your subconscious a visual reminder of what’s most important and ensure you take steps not just to answer emails, but focus on the bigger picture.
Additional tip: You can make the size of the bubble that represents opportunity (on the matrix) – relative to the size of savings. Ex: Huge savings potential – very larger bubble; small savings – smaller bubble. This will help visually represent the opportunity (for all you visual learners!).
As a first step to structuring a project based on your opportunities, a project charter should be written. You want to ensure that it clearly defines what the project scope is, expected results and your key stakeholders (business partners). In the below slide, you can see six sections that are needed to help you keep focus for the duration of the project. This is especially important when engaging in very complex and lengthy projects.
Ensuring stakeholder buy-in for a project charter helps to:
- Provide functional expertise and experience
- Confirm support for sourcing approach
- Provide resources to support the project
- Make key decisions / final approvals
- Facilitate implementation
- Provide leadership direction and support
Pro Tip: Don’t skip this step! I know it seems like a trivial step, but putting things down on paper helps to solidify them. I personally tend to move fast and skip things that appear to be low value, but this isn’t one of them. Project plans provide a clear definition of your intentions and plan to move forward.