Are you Using Category Profiling?

Choose what requires profiling, this will depend on the organisation that you work for. In this instance, we have chosen paper. If your company isn’t heavily reliant on paper your category profile might be at a higher level before your break down your category tree. If your company is a publishing house that relies on printed print and accounts for a significant chunk of your third party expenditure, a paper increase in the cost of paper consumables within the supply chain will have a bigger effect and warrant the category profile being done at paper level.

Requirement		Parent Cat. (if appropriate)
Summarise cat. dependencies (upon and to):
Summarise key specification issues
Key Stakeholders	Expenditure PA (£)		Supplier(s)	Contract Term
Summarise any specific influences on customer(s) demand / demand dependencies:
Summarise key supplier differences / capability / basis of selection / price performance & drivers / contractual constraints:
Summarise comments / recommended action:

•  List Dependences within the supply chain
• Action: Request for a spend report from financed to analyse spend in the last 4 years

1. Describe the category
2. Scope
3. Commodities falling within the category
4. Explain how this work is aligned to business objectives and the procurement strategy
5. What is the current supply and demand
6. How many suppliers do you have/ or available
7. Is the contract compliant?
8. Communicate intention for sourcing strategy
9. Draw up category plan and allow for inbuilt reviews
10. Keep informed of category changes, new opportunities, challenges, risk and supply chain changes
11. Profile the risk
12. Review opportunities in the market
13. Understand impact on the customer/organisation
14. Determine short, medium and long-term objectives

 

Action: Desktop Market Research for Cat. Profiling 

Opportunity for Negotiation?

Cat. / Sub-Cat.	Value of Spend PA (£)	Price and Source Flexibility	Past Effort and Expertise	Savings (%)	Potential Savings PA (£)	Stakeholders / Departments	Prioritisation
							Business Impact	Ease of Implementation		Priority
								Internal Complexity	External Market
		H= High M= Med L= Low	H= High M= Med L= Low				H= High M= Med L= Low	H= High M= Med L= Low	H= High M= Med L= Low	H = High M = Med L = Low

Develop a Category Vision

Borrowed from the FMCG portfolio, a category vision can be adapted to sit within category management for procurement professionals.

Start building a vision by doing the following

1. Focus on realistic growth opportunities and contract improvements across the supply chain. Collate information to check for opportunities to grow categories sustainability by creating opportunities within the procurement process and post procurement contract management to develop opportunities for aggregation. Commercial should be taking to operations to understand what the immediate demand is and engage early to assist with early planning for future demand. Value is achieved by working collaboratively. Any proposed solutions should be achievable to ensure credibility is maintained
2. Be realistic about your proposals, don’t over promise a dazzling vision and under perform. Your vision and strategy needs to be aligned to your business objectives. Use information readily available to develop insights into options for category improvements.
3. Engage with suppliers to ask for assistance in generating a realistic and compelling category vision
4. Use the category vision to support supplier rationalisation. Having multiple suppliers delivering similar or the same family of products and services waste money and time.

Focusing on procurement cost savings initiatives drives the biggest impact to the bottom line early in the transformation, creating early wins and fueling additional transformation initiatives

According to Procure Port

What is Category Profile Sourcing?

We cannot talk about category profile sourcing without first mentioning category management as the two are intertwined.

When the term ‘category’ is used in procurement it is used to refer to the grouping of similar items for procurement. For example, pens and pencils can be collectively placed under the ‘stationery category’.

The Chartered Institute of Purchasing and Supply (CIPS) conveniently provide us with the following definition for category management:

“…Category management is a strategic approach to procurement where organizations segment their spend into areas which contain similar or related products enabling focus opportunities for consolidation and efficiency.”

Now, turning back to category profile sourcing, this is the process of finding, selecting, and qualifying vendors based on their category profiles.

Category profiles are simply documents that consolidate information regarding particular categories.

Now that we’re aware of what category profile sourcing is, let’s explore how you can take advantage of it to better your procurement efforts.

Strategy 1: Use Category Profile Sourcing to Thoroughly Appreciate Each Spend Category

Did you know that data-driven enterprises are:

· 23 times more likely to get new customers,

· 6 times more likely to keep old customers and,

· 19 times more likely to make more money than their competitors?

When it comes to procurement, having access to exclusive spend category information is priceless as it gives you a competitive advantage.

Data is the new oil and having the latest and most up-to-date metrics will enable procurement teams to make the best possible decisions. 

From category profile sourcing you will discover specific details regarding spend categories and get nuanced information that will assist you in developing risk profiles for each category.

Strategy 2: Use Category Profile Sourcing to Understand the Marketplace

If you have hopes of improving your procurement efforts, having a good grasp of what’s happening in the supplier marketplace is critical.

This will aid you in knowing which suppliers to choose. And it is also part and parcel of efficient category management tactics.

Category profile sourcing will facilitate this understanding of the marketplace and the vendor selection process as you will get a very clear idea of the major category players as well as each supplier’s unique dynamics and best practices.

Strategy 3: Use Category Profile Sourcing to Create a Reliable Network of Suppliers

One of the major key takeaways from the disruption in supply chains that affect the majority of enterprises in the wake of the COVID-19 pandemic was the need to have a reliable network of suppliers on hand to turn to when things go south.

Disruptions are costly as any CPO will tell you. Not being able to access raw materials can be devastating. This is why having several trustworthy suppliers that you can do business with especially in emergencies is extremely important.

Thanks to sourcing in the right way, you can build and maintain favorable relationships with a variety of suppliers across your main categories. In the event that you need them, you won’t have to start the sourcing process from scratch as you have already qualified them. 

Conclusion

Profile sourcing can assist you in ameliorating your procurement efforts.

While adopting profile sourcing as a procurement improvement strategy is certainly a step in the right direction, there is still something else you should do to better your procurement activities – integrate procurement software.

Check out more information available in the section or examples of a category vision