In an effort to give out category management information, tips/tricks and insights, I’ve decided to create Category Management Monday’s! You can always 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.
For this week’s addition to Category Management Mondays, we continue to the next step of the process. And wouldn’t you know it, it’s creating a project plan. Shocking I know, but our jobs don’t require us to be rocket scientists, just part-time project managers! In creating a project plan there are five clear steps in the below slide. All of these things are typical for any type of project management you may do.
Pro Tip – If you are like me and project planning is the bane of your existence, as it seems only to be a step to slow you down – I have a fix. You have to change your mindset. Tell yourself you love it and it’s what keeps you on track. I like to believe I will remember it all, but that’s not always a fact. And remind yourself that you can’t forget something if it’s written down and you can see it, but you will if that’s the only place it’s located. There’s limited space in there!
Pro Tip 2 – Make sure you have a place to store all of this information to pass on when you leave. SharePoint, Google Docs, internal cloud databases, they all work. Because the last thing you want to do is leave the company / next Category Manager up a creek (or maybe you do… who knows!). It also allows you to stay organized and revisit when you need to remember who was involved, what happened and why.
For this week’s edition of Category Management Mondays, I wanted to recap the most important CatMan (Category Management) tools. I took a look back at what I was initially trained on at Amgen and made some tweaks. Although I agree with the majority of the company’s once “must have” suggestions, I’ve found in my current role what’s work best for me.
You can read the slide in order like you would a book. The first line starts with an opportunity analysis and the second supplier perspective. These would be the respective order you should complete the actions in. Unfortunately, if you don’t have time to complete them sequentially, you can always do the matrixes in parallel. Nothing like a little time management to speed up the process when needed.
I also excluded something that is very important if you are working on direct materials and even some indirect. Which was the Risk and Vulnerability Matrix. When I take a look at most marketing or indirect services, the risk/probability of occurrence for an event is typically under the “No Action.” And thus my rationale for exclusion. I also added in the Gemstone/Chessboard and prioritization as I think this is something that was critically missed. Every time I need to come up with ideas, I tend to go back to this step (and thus the addition).
Pro Tip – Not every company or category is the same. You should always reassess what’s needed dependant upon your industry, spend and the category baseline (what’s been done previously).
In the initial phase of any project, you’ll want to get to know your business partner. And if you are like me, you sometimes struggle with exactly what to say.
ProTip 1- for the week is to create and tweak your own interview guide. If you have a structured approach, you’ll be able to go back and reassess your notes quickly and concisely to get the information you need. It also will provide for a guideline to ensure if the conversation goes off topic, you can always steer it back to move your project forward.
ProTip 2 – If you ever have a hard time starting a conversation with a business partner you can follow these three easy steps to break the ice:
1. Schedule it in their office or where you have to walk by their cube/space
2. Try to find something in common (comment on kids pictures, or other things posted in their space, or find them on LinkedIn/FB to see their interests) to talk about
3. If all else fails – give a compliment! But be genuine and specific. If you leave them scratching their head on why you told them you like their basic khaki pants, you’ve done more harm than good!
This edition of CMM, we are talking about the infamous business or hierarchy of needs (AQSCI or AQRSCI) for category management review. It’s extremely necessary to carefully define all the wants, needs and nice to have of the business. Just like a pyramid, you need to have a sound foundation, to be able to build to the top. Without it, the entire structure crumbles.
Pro Tip 1 – Once the basic business needs are satisfied (assured it can be provided and at the quality you need) then the ‘Business Wants’ become more important. Sometimes it’s hard enough to get the bottom intact, so you should try to focus on this first. Don’t let business partners persuade you to think otherwise!
Pro Tip 2 – If key business requirements are not met, there is a huge opportunity for a #Category Management Fail! Make sure you evaluate all business needs and don’t forget to define constraints and enablers for each category.
It’s the last week of June and we are all trying to make it to the 4th of July for those precious days off!
This week’s edition, we will continue to move through the core tools I presented earlier in the month. After moving past the business requirements, the next portion is to assess is Category, Spend and Market Research (the triangle). Since I’ve already covered Spend Analysis, let’s focus on Category Analysis.
One of my least favorite exercises is the total cost of ownership (TCO). I say it is my least favorite because there are so many things to take into consideration, it’s easy to forget one or two. Additionally, if you end up using average costs, your TCO can become basically worthless.
Pro Tip 1– when going through to asses base price + delivery costs + lifecycle costs + switching costs = TCO, make sure you track and record all of your costs in a list. You need to be able to keep track of even the smallest costs including internal staff costs to train and implement a potentially new system.
Pro Tip 2 – Try to find someone who has sourced the same category prior. This way if there are very small or specific switching or life cycle costs you might not realize, they are sure to be able to bring them to your attention.
Can you believe it’s already July 1st! Just a few days away from what I consider the halfway point of the summer.
So for this week’s edition of CMM we are going to look at the last leg of the analysis triangle. Market research! One of my favorite parts of category management.
When you think about Category Management Research, it really can be divided up into three parts. Primary/secondary market research and data in the category, competitive intelligence with benchmarking against your peers, and the third the final analysis and how each comes into play when making a category management strategy decision.
Collecting all this data on your own is a daunting task. The phone calls, the database searches, creating an exhaustive analysis of Porter’s five forces. The list goes on for what feels like an eternity.
That’s why most companies outsource this portion of the process. Especially when there is a multitude of companies who update on a quarterly basis the most used categories and have industry updates within them. Why re-invent the wheel? You need to keep up to date with the trends, but not spend all your time researching them.
Pro Tip 1 – Outsource this if possible. There is a multitude of companies who provide canned market research for categories and a very low cost. Even if your budget is under 1k, it’s worth the spend (vs. your time).
Pro Tip 2 – A couple of companies that I’ve used in the past, who provide category intelligence are the Smart Cube and Beroe (GEP). Others that I’ve seen (but haven’t used): CASME, CIPS, Source One, Spend Edge, Gartner, and Procurement IQ.
I’m sure there are a plethora of companies out there (including category specific companies such as advertising agencies, supply chain focused, etc.), but the ones mentioned I have consistently heard over my career.
Current Position Analysis
The current Position Analysis provides market and pricing drivers from the client/supplier point of view. This matrix is pretty straight-forward and simple. Single suppliers in a market place will drive higher prices and multiple suppliers drive pricing down. And the number of customers in the market place can also drive pricing down.
Pro Tip 1 – A structured 2×2 matrix (like the current position analysis) is an effective tool that can communicate insights by turning complex ideas into simple options.
The matrix can provide a bigger picture of options that are MECE* and is generally divided into four squares that have their own distinct options/strategic choices. Each option or choice is plotted into the matrix by looking at two key factors. The two dimensions must independent from each other for the matrix to work.
Example: Amount of time vs. spend per project
When used correctly, it can make you look like a sourcing Rock Star!
*MECE is a way of segmenting information into sub-elements that are mutually exclusive and collectively exhaustive. Elements ‘exclude’ each other (are different) and are ‘exhaustive’ (full comprehensive – considers all aspects).