Women in

Procurement 2019

DELINEATING CATEGORY MANAGEMENT AND STRATEGIC SOURCING What is the difference?

Women in Procurement Sydney - 30th April, 2019

Jonathan Dutton FCIPSJD Consultancy P/L

www.jdconsultancy.com.au

CPO EXAM Question:

Question 1:

Describe the detailed differences between STRATEGIC SOURCING & CATEGORY MANAGEMENT and discuss.

Time allowed: 30 minutes

What is CATEGORY MANAGEMENT?

CATEGORY MANAGEMENT The entire art and science of professional

procurement, applied to a single genre of spend.

What is CATEGORY MANAGEMENT?

CATEGORY MANAGEMENT The entire art and science of professional

procurement, applied to a single genre of spend.

EXERCISE: What are your TOP THREE spend categories?

1.

2.

3.

7

Strategic Sourcing & Category Management What’s the difference?

I. Some activities in common

II. ‘Procurement’ describes the end to end purchasing process, of which strategic sourcing is a subset

III. ‘Category management’ is a contemporary term applied to the focused application of the end-to-end procurement process to a defined range of goods or services, and with benefits realisation goes further

8

Demand

analysis

Supply

planningMarket

engagement

Strategic

sourcing

Strategic Sourcing

The sourcing processusually stops at the award of the contract

Source : Paul

Rogers

9

Category

analysis

Mobilisation

Category

planningMarket

engagement

Category

management

Benefits

realisation

Category management

Category management is a broader termand includes BENEFITS REALISATION

Source : Paul

Rogers

A focus on Outcomes

Developing Strategic Options Managing Outcomes

Why What Specification How Tender Processing& Contract Award

Management

Source: CIPS Australia 2nd Annual PSPF Govt Conference 2006 - Paul Hopkins (Deputy Director-General Procurement) NSW Department of Commerce

Re

sou

rce

C

om

mit

me

nt

Re-focus procurement resources from just process management to the activities that provide the maximum long-term sustainable benefit

A narrow view

of the Procurement Function

• Issue Request for Tenders

• Evaluate bids

• Award Contract

Valu

e

Putting in the effort where it makes a difference – UPSTREAM & DOWNSTREAM

The State of the Art of Category ManagementCIPSA research 2011

• 40 categories each, or 70? – Leaves no time!

• Low spend volume in Australia

• Cat Mgt works less well on INDIRECT spend

• Little training for staff …

• No extra time or people allocated as resources ….

“ That’s what we did actually … “ Leading CPO

What is CATEGORY MANAGEMENT?Summary

A strategic focus … • Long term view of category strategy & CUSTOMER focus

• With the realisation of BENEFITS & competitive advantage

• Clearly defined category portfolio with identifiable synergies between sub-categories

• Sufficient degree of focus and specialisation in terms of time and resources … and cross-functional in nature

• Well documented and clearly articulated category strategy

• Proactive influencing of stakeholder behaviours and internal demand through broader internal teams

• Proactive pre-positioning of category to take advantage of supply market shifts

Your category strategy should help you tap supplier capabilitiesand, ultimately, grow REVENUE

✓

Category Value Objectives

Reduce TCO

Reduce External Costs

Manage Risk

Reduce Internal Process Costs

Reduce Fixed Assets

Improve Quality

Reduce Working Capital

Improve Delivery Performance

Other

Increase Revenue

Improve Material / Service Performance

Accelerate NPI

Enable New Business Capabilities

Other

Other Goals

Improve Flexibility / Responsiveness

Improve Delivery Performance

Cut Order Lead Times

Other

CategoryPerformance Management

CategoryStrategyExecution

CategoryGovernance

CategoryStrategy

CategorySegmentation

• How well do you tap supplier capabilities to enable objectives beyond

purchased cost reduction?

• Do you enjoy innovation advantages from your suppliers compared to your

competitors?

• How do you systematically enable this in your category management and

SRM processes? Do you have strategic SRM – or just basic supplier

measurement and compliance management?

Source: Hackett Group

“50% US Cat Mgrshave REV

targets”

Category Management

as a MARKETING discipline

Professional knowledge +

Market knowledge+

Product knowledge =

Sourcing Excellence

Category Management on

your KRALJIC MATRIX

Source: CIPS slide after Kraljic

Back to the MATRIX …

DISCUSSION:Is CATEGORY MANAGEMENT really working for you?

DIRECT

✓Should be critical to ops

✓TIME must be made for CM

✓Strategic supply (raw materials)

✓Key to understand market

INDIRECT

X Little time/too many categories

X Buying mostly commodities

X Low strategic value

X Difficult to be master of all

EXERCISE: How might YOU better use Category Management to help your top 3 categories?

1.

2.

3.

KEY QUESTION …

Is CATEGORY MANAGEMENT working for you? Really?

Get the FREE booklet ….

https://www.jdconsultancy.com.au/single-post/2017/01/24/aus-cm

www.jdconsultancy.com.au

Or, come on the cheap

course

Jonathan Dutton BA (Econ) Hons FCIPS FCIM FAIM FRSA GAICD

www.jdconsultancy.com.au

JDTheBuyer

Strategic Procurement Training An intermediate level management training workshop for procurement professionalsManaging the Buyer An intermediate level training workshop for sales managers dealing with procurement Sustainable Procurement & the chain of responsibility An intermediate training workshop on sustainable procurement SRM in action A two day workshop to implement SRM strategy for your organization

jd@jdconsultancy.com.au

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