Category Management(1)

8/11/2019 Category Management(1)

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HED 460

Sourcing Simulator Licenses

Texas A&M University

University of Missouri.

Colorado State University

Western Kentucky University

Texas Christian University

Murray State UniversityMichigan State University

University of Kentucky

Oregon State University

University of Nebraska

Southern Illinois UniversityIndiana State University

Iowa State University

UNC Chapel Hill

UNC Greensboro

Kansas State University

Se

West Virginia University

Cornell University

Baylor University

University of Hawaii

Texas Tech University

Kent State University

Middle TN State University

Stephens College

California State University

University of Rhode Island

Sam Houston UniversityOhio State University

Southwest Texas State University

U of Massachusetts

N Illinois University

U of California - Irvine


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Sourcing Simulator Licenses

Auburn University

Ball State University

Clemson App. Res.

Delta State University

Oklahoma State U.

East Carolina U

Tampere UniversityNorth Carolina State U

Integrated Consulting

Stonefield Josephson

Prime Tanning Co

Bayer Clothing GroupMay Merchandising

Logistics Training Intl

Exterior Wood, Inc.

Firmin House

Glen Oaks Industries

Se

American Identity

Andersen Consulting

Adexa

Burlington Industries

Cone Mills

Dillards

DuPont Nylon

EDS

Galey & Lord

Glen Raven Mills

Hologix Inc

IBM

Milliken & Co.

Russell-Cross Creek

Sara Lee Casualwear

VF Corp

Wellman Inc.

Bios Group

Burlington Chemical Co

CFT Consulting

PricewaterhouseCoopers

T-MNA Inc.

Timberland

NHK International

Twin Star Intl

Nordstrom

Bergdorf Goodman

LL Bean

Wal-Mart

Lands End

The Gap

Wigwam Mills

JBA International

Bradley Perspectives


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Efficient Consumer Response Efficient replenishment

Systems, EDI

Fewer stockouts

Efficient promotion

Promotions based on consumer demand Lean inventory to support promotions


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Efficient Consumer Response Efficient assortment

Turnover

Profit

Enhances brand and retailer perceptions

Efficient product introduction Pull strategy for new products

Based on unmet needs


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Category Management Technique used by retailers

Product is sub-divided into categories that

Reflect purchasing behavior of targetcustomers

Are managed as separate business units

Supermarkets and massmerchandisers


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Categories as SBUs Department is too broad and less

strategic

150-300 categories vs. 15-20 departments

Product/brand is too narrow to approach

strategically 15-20,000 skus in a store and 16,000 new

products/year


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Category Management Integrationof Buying and Merchandising

responsibilities

Management of price, shelf space,merchandising assortment strategy,promo efforts, replenishment

Affects manuf. sales and marketing Team approach between channel

members


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Category Plans

Jointly developed by retailers and

suppliers Define strategies and financial

objectives GM

Sales/cu ft.


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Buying/Merchandising Decisions

Responsibilities must be

integrated Inventory allocation

Space allocation/analysis

Customer demand


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Category Management Goal - Retailer

Optimize each part of the storeAllocate space that maximizes Gross

Margin/unit of space

GoalSupplier To become the lead supplier or channel

captain for that category


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Benefits Increased category sales (5-15%)

Increased category marginsAssists in creating optimal assortments

Reduction of SKUs in most cases

For Mfct., move from trade allowances(push) to trade promotions (pull)


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Direct Profit Profitability (DPP) Profit associated with each category

Per unit Gross Margin minus all variablecosts

Procurement

Distribution

Sales


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Defining Categories Consider end uses (frozen, chilled, deli

fresh)

Consider substitutablity(fresh/frozen)

Consider complimentarypurchase

decisions (pasta + sauce) Base decision on how customer buys

Same real estate


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Dairy category Displayed by brand name

Customers shop by type (low fat, fullfat, no fat, fruit)

Then individual flavors


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Roles/Implied Strategies Destination Traffic building

Turf protecting Transaction building

Excitement creation

Cash generating Image creator


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Pasta CategoryStrategy Examples

Traffic builderStd. Packs of dried spaghetti

Transaction builder Parmesan, fresh herbs, pasta sauces

Cash generator Lge. economy packs of dried pasta

Image creator Filled pastas: ravioli, tortellini.

Excitement creator Fresh, less well-known: stelline.


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Roles/Implied Strategies

Routine/

preferred

Transaction building

Profit generating Turf protection


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Convenience Transaction building

Profit generating Image enhancing


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Occasional/

seasonal

Traffic building

Excitement creation Profit generating


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TacticsTraffic buildingAggressive pricing on loyalty

products/low margins Media on frequently purchased items

Prominent space


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Case Study - ToothpasteResults Previous Current % Diff.

Sales 12.3m 12.64m 2.8%

Gross Profit 1.66m 1.52m (8.4%)

GP Margin 13.5% 12% (11%)

Turns 12.2 14.5 19%Days supply 30 25.2 (16%)

GMROI 1.9 1.98 4.2%


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Leading ManufacturersCM P & G

Kraft General Mills

UnileverRalston PurinaPillsbury

QuakerKelloggsCoke


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Leading RetailersCM HEB

Safeway Wal-mart

Ahold

Kroger

Wegmans

Category Management(1)

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