CATEGORY MANAGEMENT IN PURCHASING

Transcription

1 CATEGORY MANAGEMENT IN PURCHASING A strategic approach to maximize business profitability Jonathan O'Brien KOGAN PAGE London and Philadelphia

2 Contents Figures Tables Foreword Preface Acknowledgements About the author vii x xi xii xiv xvi 1. Introducing category management 1 Category management explained 2 The relevance of category management today 5 The impact of technology 6 Our love affair with cheap 7 Unlocking value from the supply chain 8 Segmenting the spend; identifying the categories 10 The potential benefits of category management 15 Surely someone has already thought of this The principles of category management 19 The three foundations of category management 19 The four pillars of category management 28 Summary The stages of category management 41 A circular process 41 Moving through the five stages 42 Reviewing process 46

3 iv Contents Realizing the benefits 46 The full process 47 Knowing what to leave out 49 Process duration 49 Before you start Stage 1: Initiation 52 Kicking off the process 52 The initiation toolkit 53 Scoping the category project 53 Opportunity analysis 56 Securing the executive sponsor 58 Recruiting team members 61 Situation, target, proposal 63 The team charter 65 Stakeholder mapping 67 Communications planning 70 Gaining first insights into the category 73 Defining the business requirements 79 Project planning 88 Securing quick wins Stage 2: Insight 93 Introduction to data gathering 93 The insight toolkit 98 Convincing the suppliers you mean business 98 Internal data gathering 101 Supplier data gathering 103 Researching the market and potential new markets 103 Understanding the supplier's pricing approach 105 Determining where the value is added in the supply chain 114 Developing a cost vs price breakdown 117 Identifying current vs future technology 124 External environment analysis 127 Understanding market competitiveness 127 Determining potential sources of leverage 133 Understanding how the supplier views the relationship/ account f 149 Portfolio analysis with supplier preferencing 156

4 Contents i v 6. Stage 3: Innovation 159 Determining the future sourcing strategy 159 The steps towards innovation 160 Summarizing the analysis 162 Strategic option generation 162 Strategic option evaluation and selection 171 Building the chosen option 173 Risk and contingency planning 175 High-level implementation planning 176 Creating the strategic source plan 178 Source plan sign-off Stage 4: Implementation 186 Turning the future sourcing strategy into reality 186 Turning a strategy into reality 187 Detailed implementation planning and project management 189 Managing change 195 Contract planning 201 RFP/RFQ/tender process 206 E-auctions 211 Supplier selection 219 Negotiation 224 Finalizing the legalities Stage 5: Improvement 231 The process of continuous improvement 231 Focusing on improvements 233 Lessons learnt review 234 Supplier relationship management 237 Attracting innovation, breakthrough and ongoing valueadding initiatives 242 Ongoing alignment with business requirements 244 Ongoing market analysis 245 Determining when to start the process again Making category management happen 247 Before you start 247 Executive endorsement for a category management programme 248,Programme governance 250

5 vi I Contents The programme plan 251 Benefits measurement and tracking 253 Programme reporting 256 The right capability 258 Programme communications 260 E-enabling category management What the future holds 264 The challenge facing organizations over the next 20 years 264 Future implications for purchasing 266 Corporate social responsibility 267 The global marketplace 269 The role of category management for the future 270 Appendix 1: Case study: GlaxoSmithKline 272 Appendix 2: Case study: the fleet category 280 Glossary 291 References and further reading 293 Index 296