Procurement operations have progressed in many ways over the years. Technology has played a huge factor in that progression. Category Management is finding its place among some of the largest companies worldwide. This does not happen by chance, it happens because a process or program works through all levels of the business.
Throughout the years, procurement teams learned to focus on internal programs that supported business operations. Distributors and suppliers were their go to source for materials that supported the business. Buyers looked at each part number and managed pipeline, prices, and upgrades throughout the business.Today we find procurement models turning to their distributors and suppliers with the expectation that they will fully manage these products and services while maintaining a strong line of communication. Customers have become confident in their distributors' and suppliers' abilities to assist in a procurement capacity.
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What programs and services created such a transition in the market place?
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Great customer service
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Agreeable Terms and Conditions
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Market condition reporting
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Product reporting tools
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Automated processes from design-in to an EDI invoice
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Customer and distributor program integrations
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Communication about products and services
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Reduced cost based on a full category of products purchased rather than individual part usage
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Proactively manage products in distribution and supplier systems
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Programs that include category management and allow large downloads of data storage
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Early warning systems for schedule or product challenges and changes
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Ability to easily update scheduled changes within the supplier's system
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Distributor’s ability to track product movement and performance history
Challenges in Category Management
Category Management is a full management solution for a customer’s procurement requirements. All programs have their challenges to overcome and improve. One potential challenge your business might encounter is the need to implement and accommodate changing systems. For instance, possible system upgrades may be required, or program changes may need to be mapped throughout the company system.
Before you can address these challenges, you must first address these six key questions:
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Do you want safety stock to get you through the transition period?
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Allocated items- If changing orders from customer to Distributor/Supplier, How will this affect your delivery dates?
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Will you lose your place in line to receive product with another supplier?
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Can you structure the transition after your current pipeline is complete?
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What is still in the pipeline?
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Can the order transition easily?
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Resolving Challenges
After assessing your system by answering these essential questions, you will be well-equipped with the information you need to resolve the challenges to your category management plan. Here are a few things you should include in your plan:
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Train suppliers within the organization.
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Setup a turn structure that will satisfy everyone.
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Understand supplier Min/Mult requirements verses customer expectations.
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Keep in mind that NCNR agreements between Distributor, Supplier, and Customers are an important factor of cost.
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Establish a Supplier Performance Metric and Report Card
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Include the customers Engineering, Financial and QC teams when developing new programs.
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Get contact names and numbers to help resolve any challenges.
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Use one code in the system to drive data within multiple departments.
The Road Ahead
There are many intricacies involved with Category Management in Procurement Operations. Suppliers and customers require an in depth review of operations and expectations, making communications the pivoting factor. When the program is in full swing the benefit of customer cost savings takes hold and multiplies with each category added to the program.
The buyer’s area of responsibility is not new to distributors and suppliers. What is new, however, may be the level or degree of involvement on customer site not to mention learning additional customer processes. Working together can move all business structures into a new and improved market while easily reporting progress to shareholders.
What questions do you have about Category Management in Procurement Operations?
