Purchasing Predictive Tool for Category Cost
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Purchasing Predictive Tool for Category Cost

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Purchasing Predictive Tool for Category Cost Purchasing Predictive Tool for Category Cost Presentation Transcript

  • Purchasing Predictive Tool For Category Cost Bill Kohnen An Analytic Tool for Predicting Cost For Corporate Purchasing Commodity Categories Bill Kohnen August 2013
  • Summary • Professional Corporate Purchasing Departments manage total spend by assigning it to a Spend Category and with further description within the category • Within each category there can be variation in cost savings potential • Projecting potential costs can be time consuming but is important for goal setting and resource allocation • To expedite the process the following tool has been developed based on proprietary data and experience • This open version is very accurate and useful (think commercial GPS level) • It is a framework for analysis with the real value coming from input by Purchasing Professional's with specific category expertise Bill Kohnen August 2013
  • Overview of Tool • Number of Suppliers • Interchangeability of Products or Services • Business Conditions of Supplier • Business Conditions of Buyer • Influence of Other Groups at Buyer • Percieved Importance to Buyer • Scope of Requirements • Perceived Sunk Costs • Actual Cost to Change • Potential Optional Approaches • Qualified Options • Available Disruptive Options • Cost of Alternatives • Final Score of options Indicates Potential for Savings or Increase • A Professional Purchasing Commodity Manager Should be able to Complete the Initial Scoring on their Own • For Large Organizations Can have Each Site Complete then Review and revise at Global Category Workshops Areas to Consider Bill Kohnen August 2013
  • Category Score 1 Number Suppliers 1 literally one supplier 10 is unlimited # 2 Interchangibilty of products or service 1 is Unique 10 comletely interchangibility 3 Business Conditions Supplier 1 is Growing, market Leader, Customers approaching them 10 Losing share problems with product industry in down cycle 4 Business Conditions Buyer 1Lossing share problems with product industry in down cycle 10 Growing, market Leader, Customer approaching them 5 Influence other Groups 1 Completely uncontrolled with decisions based on influence 10 Decision making completely objective and impartial 6 Perceived Importance to Buyer 1 High 10 Low 7 Scope of Buyer Requirement 1 is at a single local site 10 Global Multisite Usage 8 Perceived Sunk costs with current 1 high 10 None 9 Perceived cost to switch 1 More than Annual total spend 10 No cost to change 10 Potential optional approachs 11 Qualified optional approaches 12 Cost relative to current of options 1 is higher 5 equal cost 10 zero cost 13 Disuptive technology of competitors 1 No new technology 10 Multiple availible in Market Score 0 Tool Format and Description Bill Kohnen August 2013
  • Results Analysis Score 13 26 39 52 65 78 91 104 117 130 Potential Reduction 0% 1% 2% 3% 5% 6% 7% 10% 15% 50% Potential Increase 20% 15% 10% 5% 0% 0% 0% 0% 0% 0% 0% 10% 20% 30% 40% 50% 60% 13 26 39 52 65 78 91 104 117 130Score Potential Commodity Savings or Increase Potential Reduction Potential Increase Bill Kohnen August 2013