Category management
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This is an editable presentation of Category Management in procurement. The presentation explains the ways of creating categories and provides several examples of category creation in different businesses. It also gives the main pros and cons of category management. Feel free to use the presentation for your training and change it as you wish.
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Category management
- 1. READY TO USE PRESENTATIONS TO DOWNLOAD THIS FILE AS EDITABLE PPT AND MANY MORE FREE RESOURCES PLEASE VISIT OUR BLOG CLICK HERE!!!
- 2. Category Management Zoran Kecman, MCIPS 25th July 2020.
- 3. What are we going to talk about today History and Definition Creating categories Using Kraljic to create categories Pros and cons Example 1 Example 2 Example 3 Example 4 Key Takeaways
- 4. History • Category management originated in Marketing in the 1980-s • In the following years automotive industry procurement teams started to use the concept Definition Categories – general families of purchased product or service (Monzka et all.,pg195, 2009) CIPS definition: Category Management is a strategic approach to procurement where organisations segment their spend into areas which contain similar or related products enabling focus opportunities for consolidation and efficiency.
- 5. Creating categories Similar products / services: ° Construction materials ° IT ° Transportation ° Grains How the products/services are used in the business ° Directs – main materials ° Indirect By Geography ° Regional procurement team Matrix teams
- 6. Using Kraljic to create categories A separate category manager for one item One CM could cover several groups
- 7. Pros ° Better sourcing plan by category ° Specialization allows for better knowledge about the market ° Provides significant improvement in case of multi-location businesses Cons ° Creating categories takes time and it is difficult to change later ° Silos effect – lack of cooperation between category teams, reducing potential synergies ° Relatively difficult to hire category managers and difficult to switch jobs Pros and cons for Category Management
- 8. Example 1 (aconstructioncompany) Classic categories: • Building materials • MEP materials • Subcontractors civil work • Subcontractors interior • Hired labor • Transportation, food, accommodation • Office & IT
- 9. Example 2 (agrainprocessingplant) Direct materials Rice (80%) Other grains (20%) Packaging Indirects MRO (maintenance, repair, operations) Logistics services Other indirect costs
- 10. Example 3 Catering Buyer 1 All direct • Food • Packaging Buyer 2 Production consumables F&B consumables Admin consumables IT Operations Transp ort Buyer 3 Facilities Maintenance SafetySecurity Quality control
- 11. Example 4 Category manager • Analysis and planning • Creates strategy • Key supplier management Execution team (not category related) • RFP / Tender • Contract negotiation • Performance monitoring Transactional team (not category related) • Issues PO’s • Invoice – to – pay Category manager takes care of the complete S-2-P cycle for his category: NEED - SOURCE – CONTRACT – PROCURE - PAY
- 12. Key Takeaways ONE: Category Management is widely used in procurement TWO: Create the categories wisely THREE: Cooperation between category teams is important FOUR: Think about your career from Category perspective