Please enable JavaScript.
Coggle requires JavaScript to display documents.
CATEGORY STRATEGY DEVELOPMENT - Coggle Diagram
CATEGORY STRATEGY DEVELOPMENT
Integrative Strategy Development
Corporate strategies
Business unit strategies
Category/Sourcing strategies
Supply management strategies
Insourcing/Outsourcing
Business strategies on core competencies
Poor performance levels
Emerging new technologies and products
Demand changes
Long-term impact
Geographical location of demand
Complex and strategic decision
Translating Objectives Goals
Supply base reduction objectives
Supply assurance objectives
Technology/new product development
objectives
Quality objectives
Cost reduction objectives
Enabling Effective Category Strategies
Validate savings or contribution to other company objectives achieved by supply management
Maintain initiative through presentations to senior executives
Allocate resources initially, including assessment of current spend, data collection, market research, training, and people
Sources of Supply Risk
Fire and theft
Weather
Increased regulatory and customs delays
Poor communication of customer requirements
Strikes and labor disruptions
Part shortages
War and terrorism
Quality problems
Evolving Sourcing Strategies
Moderate Development
Limited cross-functional integration
Single sourcing with long-term agreements
Company-wide agreements to leverage volumes
Recognition of strategic supplier relationships
Evaluated on achievement of competitive objectives
Supplier viewed as resource
Company-wide databases
Category management
Informal internal integration
Some centralization of supply management function
Limited Integration
Supply management strategies integrated early in product and process design activities
1st/2nd tier suppliers more involved
Early supplier involvement
Supply management evaluated on strategic contribution
Lead-time reduction
Extensive functional integration
Supplier development
Focus on building competitive advantage
Concurrent engineering
Strong external customer focus
Global databases
Total cost modeling
Basic Beginnings
Ensure adequate supply capacity
Adversarial supplier relationships
Impetus for change
Limited resources for improvement
Reactionary to complaints
Mid-level reporting
Short-term approaches
Efficiency-related performance
measures
Supply management characterized
Focus on price reduction
Transaction-based information systems
Supply base optimization
Fully Integrated Supply Chains
Developing global supplier capabilities
Demand higher performance from suppliers
Greater focus on strategic objectives and activities
More aggressive development of supplier capabilities
Automated non-value-adding activities
World-class performance expectations
Supply management assumes strategi orientation
What Is a Category Strategy?
Determine optimal relationship
characteristics and price/cost issues
Develop business case
Develop a strategy aligning supply
capabilities and demand requirements
Develop negotiation and contract strategy
Evaluate specific suppliers and establish
capabilities
Execute the negotiation and develop
contract
Conduct research on supply market
characteristics
Establish basis for ongoing management
and continuous improvement
Understand business unit requirements
Categories Requiring a Strategy
Significant spend
High risk categories
Complex projects
Important Outcomes
Reducing total cost of ownership for a
category
Improving category performance along
key dimensions
Minimizing risk to the enterprise
Spend Analysis Spreadsheet
Find total spend by category
Chart top 10 by descending $ spend
Sort data by category
Find number of suppliers by category
Chart top 10 by descending number of
suppliers
Find average spend/supplier/category
Apply Pareto analysis for opportunities
The Strategic Sourcing Process
Strategy Development
Contract Negotiation
Market Research
SRM
Build the Team
Porter’s Five Forces Model
Market Internal Competition
Buyer Bargaining Power
Supplier Bargaining Power
Pressure from Substitutes
Threat of New Entrants
SWOT
Weaknesses
Opportunities
Strengths
Threats
Requests for Information (RFIs)
Use to obtain general information about services, products, or suppliers
Use when large or complicated purchase
Use before specific requisition is issued
Strategy Development
Critical Category
Tactics
Increase role of selected suppliers
Actions
Prepare contingency plans
Analyze market/competition
Supplier process management
Use functional specifications
Heavy negotiation
Strategy
Form partnership with suppliers
Routine Category
Tactics
Increase role of systems
Reduce buying effort
Actions
Rationalize supply base
Automate requisitioning, e.g., EDI, credit
cards
Stockless procurement
Minimize administrative costs
Little negotiating
Strategy
Simplify acquisition process
Portfolio Analysis
Critical
Routine
Bottleneck
Leverage
Leverage Category
Strategy
▪ Maximize commercial advantage
Tactics
Concentrate business
Maintain competition
Actions
Promote competitive bidding
▪ Exploit market cycles/trends
▪ Procurement coordination
▪ Use industry standards
▪ Active sourcing
Bottleneck Category
Tactics
Decrease uniqueness of suppliers
Manage supply
Actions
Develop new suppliers
Medium-term contracts
Increase competition
Attempt competitive bidding
Widen specifications
Strategy
▪ Ensure supply continuity
Segments
Develop
Exploit
Core
Nuisance
Supplier Segment Rule
Preferred supplier
Transaction supplier
Strategic supplier
Contract Negotiation
Contract Negotiation
Create contingency plan
Conduct negotiation
Develop negotiation plan and ideal
contract
Sign contract
Price Analysis
Average price
Business unit’s price
Best price
Expected trends in pricing
Supplier Relationship
Management
Supplier Scorecards
Typical categories
Quality
Delivery reliability
Price
Responsiveness
May include feedback and input from
suppliers
Similar to supplier selection scorecards
Types of Strategies
Longer-term supplier relationships
Early supplier design involvement
Low-cost country sourcing
Supply risk management
Supplier development
Supply base optimization
Total cost of ownership
Insourcing/outsourcing
E-reverse auctions