Advanced Category

Management
CIPS South Africa Conference 2011
What do ADR do?
What is Category Management?

• Category Management is a structured approach to the

procurement of goods and services.
• It applies best practice tools and techniques in the development
and implementation of an integrated category strategy aligned
to the organization needs.
• It applies a robust structured strategic sourcing process to the
purchase of all goods and services
• It involves local stakeholders in the sourcing process
What is a Category?

A group of items or services available from the same or a

similar supplier base.

Examples:

• Stationery
• Fuel
• Lubricants
• Courier Services
• Travel Services
• Legal Services
Why Category Management?

 Manage & exploit changing business conditions

 Supplier consolidation
 Supply economics – leverage volume
 Leverage internal resources (people, knowledge,
expertise) to:
• Minimize supply chain risk “The current environment of price
• Develop BBBEE Suppliers escalation, supplier consolidation,
extended supply chains, and
• Deliver cost savings and value service disruptions challenges even
the most advanced procurement
• Improved quality and service organizations.”
- Procurement Strategy Council
• Leverage presence in the marketplace
• Drive commodity & service innovation
Benefits of Category Management

• Raises the profile and competency of procurement across the

organization – change from a “functional, operationally focused
activity” to a “business process”.
• Breakthrough savings, typically 10-30% delivery
• Results in improvements in service levels, quality, availability
and value for money
• Addresses and reduces risk in the supply chain
• Very effective use of resources – high payback ratio
• Stakeholder buy-in to results
• Delivers world class procurement solutions
• Enables supplier capability development
Key Enablers of Category Management

Organisation & Structure

Focused team with clearly defined responsibility, authority &
accountability for Procurement activity
Procurement Processes
Best-in-class measurement, approvals, conditioning, negotiation, risk
and SRM processes
People
The right people in the right positions, empowered and motivated by
accountability
Learning / Skills
Procurement team using deconstructing price methodologies, use of P2P
and educated key stakeholders
Strategic Sourcing (Category Management)
A structured process that embeds the involvement of key stakeholders
in the development of comprehensive sourcing strategies
Technology
Appropriate spend analysis, e-sourcing, e-procurement and e-SRM
approaches for sourcing and procurement
CIPS Category Management
Process
Strategic Sourcing is ....
...... the sourcing & contracting process within Category Management

Demand Strategic Sourcing

SRM
Management (Acquisition)

A rigorous, fact-based strategic sourcing process with several key milestones

 Category Management Activities EThekwini Category Management Process

Stage 3
Analyse Internal Information
Stage 2 Stage 4
Develop specification Analyse External Information
Control Assess Needs & Impact
Identify internal best practise
Points Engage stakeholders Understand market dynamics
Assess future requirements
Confirm importance Identify external best practise
Review current supplier Stage 5
Stage 1 Conduct portfolio analysis performance Establish pre-qualification
Evaluate & Develop
Prepare & Engage criteria
Identify opportunity Analyse sourcing and price Approach
history Determine potential suppliers
Identify project Identify stakeholder needs Analyse & interpret
Determine authority level Identify BEE suppliers information
Review current status Document impact & risks
Identify & analyse risks Develop cost analysis
Review existing plans and
contracts Define award criteria
Conduct spend analysis Generate & evaluate options
Identify stakeholders Project Bid Develop source plan
Establish team Approval Analyse Specification Submit to BSC for approval
Define project scope Obtain mandate to test
market
Develop communication plan
Initiate Demand
Stage 10 Source Stage 6
Manage & Review Performance Evaluate Supply Base

Key Activities Contract Category Create & issue RfX

Acquisition Bid
Review contract performance Close-out Management Manage RfX process
Evaluation
measures Collate & analyse responses
Review supplier performance Establish TCO
measures Manage Performance Contract Prepare recommendation to
Process contract updates award
Hold supplier reviews Stage 7 Submit to BEC for approval
Stage 9
Measure & report performance Plan & Implement Negotiate Obtain mandate to negotiate
Performance
Implement Bid
Close-out contract Adjudication Key Activities
Key Activities Reviews
Develop KPi’s/SLA Develop negotiation plan
Finalise implementation plan Stage 8 Negotiate
Contract Evaluate supplier/s
Implement plan
Transition new supplier or Key Activities Recommend supplier/s
contract Develop contract T&C’s Submit to BAC for approval
Capture knowledge Develop transition plan Obtain mandate to contract
Finalise contract
Category Management Benefits
Procurement Best Practice
Portfolio Analysis

Secure Value

Routine
The Supplier’s View
Shifting the Focus from Price Cost &
Value

Supplier Value
Deconstructing Price
Structured Cost Management
The End

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