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Category Management
Marjolein DijkshoornSydney, October 2012
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Whereas Capgemini supports clients with the improvement of the entire procurement strategy, organisation, processes and execution, this document will focus solely on category management
Provision of Goods & Services
Supplier Relationship Management
Procurement Strategy
Development
Governance & Organisation Development
Category Planning
Sourcing
IT People Knowledge & Information
Managing the Enablers
Supply Planning & Control
Pro
cure
men
t Effe
ctiv
enes
s
Benefit
Generation
Purchase Demand
Management
Set S
trategy &
Objectives
Benefits
Delivery
Pro
cure
men
t
Effi
cien
cySTRATEGIC Defines procurements prime objectives to align and support the business strategy.
Business alignment through the Procurement Board. Participants executive level.
TACTICAL Specific strategies and market approach for Commodity groups covering market and spend profiling, selection and switching. The commodity strategy will determine the optimum geographic approach.
Alignment through Multi Functional Teams. Participants functional level (e.g. HR, marketing, IT)
OPERATIONALThe delivery of benefits through a compliant environment based on information, procedures and policies in line with the strategy
Alignment through compliance.
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Category Management is the management of a specific group of commodities with similar characteristics, with the aim to increase efficiency and realise cost savings
Category Management Definition Category Management Benefits
“the entire science of the procurement subject applied to a single genre of expenditure”.
In Category Management products or services that have similar characteristics and are bought from similar supply markets are grouped together and treated as a discrete group or category.These categories are then more manageable from a procurement perspective because the items in a category require the same supplier market intelligence, the same sourcing strategies and similar supplier relationship management programmes.
The key elements of Category Management include end-to-end management of the supply chain, acute market awareness, sound (if not expert) technical knowledge, good SRM and excellent stakeholder relationships. Also, an understanding of actual consumer needs – at the other end of the supply chain.
1. Savings. Category Managers can leverage expertise and insight into a whole category as a means of driving value from a particular deal.
2. Consolidation of spend. When managing by category, consolidation opportunities can become apparent as well as well as opportunities to outsource.
3. Internal vs External alignment. It links customer requirements with supply market capabilities.
4. Team work. It enables the business requirements definition or specification to be developed so that it delivers best value. Defining your business requirements is a team game in that it identifies both the user requirements and commercial expectations.
5. Leverage. It ensures that all relevant spend is included in the category so that your leverage is maximised.
6. It reduces risk. Creating categories and putting them under the proper management of experts enables you to spot any trends or developments that might create a commercial risk and do something to prevent or mitigate it.
7. Clear Responsibilities and Communication. It helps to build good communications across the entire value chain. Category Management gives you the visibility and opportunity to communicate the right message in the right way to the right people to get the result you want.
8. Trust. It builds trust and co-working across all of the value chain. 9. Comprehensiveness. It ensures that many supply options are
considered rather than just the obvious one.
CIPS Research 2011: State of the art of category management
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CAPGEMINI PROCUREMENTSTRATEGIC PROCUREMENT CATEGORY SUPPORT ON-DEMAND PROCUREMENT PLATFORM
Strategic services that leverage Capgemini's unique mix of procurement and industry sector expertise, as well as deep understanding of client needs.
Acting as an extension of the clients procurement organization, Capgemini will perform strategic sourcing and category management for assigned spend categories.
Spend analysis, category intelligence, event management and supply risk analysis are the key activities in our category support offering. The support function of Procurement as a Service provides services to the clients retained category managers.
The leading Sourcing and Category Management solutions to improve efficiency in sourcing process • Spend Analysis• eSourcing / event management• Supplier Network• Contract Management• Savings tracking• Project Workflow
Capgemini’s Procurement specialists and Procurement as a Service™ provide a strong solution to compliment the clients Sourcing organization and Category Management approach
Category Support
Strategic Procurement
Event FactorySpend Analysis Category & Market Intelligence Supply Risk Analysis
Category Management
Contract Management
Supplier Relationship Management
Content Management
Compliance ManagementStrategic Sourcing
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Today, Capgemini BPO manages over $12.5B AUD spend with the majority being indirect spend categories. Our knowledge in these categories will enable us to bring acceleration to the clients sourcing process
1OFFICE
2FACILITY MANAGEMENT
3REAL ESTATE
4PROFESSIONAL SERVICES
5HUMAN RESOURCES
6IT & COMMUNI-CATION
7FINANCIAL SERVICES
8MARKETING
9TRAVEL
10LOGISTICS
11MRO
12PRODUCTION EQUIPMENT
1.1 Office Supplies
2.1 Cleaning Services
3.1 Contractors & Renovation
4.1 Management Consultants
5.1 Recruitment
6.1 Hardware
7.1 Banking Services
8.1 Commercial & Production Print
9.1 Conferences & Meetings
10.1 Air Transportation
11.1 Spare Parts
12.1 Material Handling Equipment
1.2 Furniture
2.2 Security
3.2 Rents
4.2 IT Consultants
5.2 Training
6.2 Peripherals
7.2 Auditing
8.2 Communication Consultants
9.2 Hotels
10.2. Road Transportation
11.2 Hand Tools
12.2 Production Equipment
1.3 Office Machines
2.3 Canteen
3.3 Property
4.3 Engineering Consultants
5.3 Employee Benefits
6.3 Software
7.3 Insurance
8.3 Media
9.3 Rental Cars
10.3 Rail Transportation
11.3 Protective Gear & Clothing
12.3 Test & Measurement Equipment
1.4 Subscriptions
2.4 Electricity
3.4 Development Consultancies
4.4 Legal Services
5.4 Employee Recognition
6.4 IT Services
7.4P- card Services
8.4 Events & Exhibitions
9.4 Train
10.4 Sea Transportation
11.4 Lab Supplies
12.99Other Capital Equipment
1.5 Literature
2.5 Water and Waste Water
3.5 Brokers
4.5 Temporary Labor - Admin
5.5 Fleet Cars
6.5 Telecom
7.99 Other Financial Services
8.5 Advertising Agencies
9.5 Travel Management
10.5 Courier and Small Package Services
11.5 Lubricants
1.6 Coffee & Other Vending
2.6 HVAC
3.99 Other Real Estate
4.6 Temporary Labor –Skilled
5.6 Payroll Services
6.6 Data Com
8.6 Market Research
9.6Air
10.6 Warehouse - 3rd Party Space
11.6 Air and Gas
1.7 Paper
2.7 Waste Management
4.99 Other Professional Services
5.99Other Human Resources
6.7 Phones Systems
8.7Promotional Merchandise
9.7 T&E Card
10.7 Customs Services
11.7 Chemicals
1.99 Other Office
2.8Landscaping Services
6.8Accessories
8.8 Sales Services
9.99 Other Travel
10.8Freight Bill Auditing Services
11.8 Cutting Tools
2.9 Snow Removal Services
6.99 Other IT & Communications
8.9 Marketing Consultants
10.9Storage Systems
11.99 Other MRO
2.8 Mailroom Services
8.99Other Marketing
10.99 Other Logistics
2.99 Other Facility Mgmt/Maintenance
CAPGEMINI CATEGORY TREE
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CATEGORY SUPPORTMARKET INTELLIGENCE
SPEND ANALYSISSTAKEHOLDER MGMTSOURCING & PROJECT
WAVE PLANNINGSTRATEGIC SOURCING
PROJECT SOURCINGSERVICE MANAGEMENT
LANGUAGE CENTRIC
ONSIGHTON-SHORE
SUPPORTS OVER 37
LANGUAGES
LOCAL DELIVERY ( onsite / onshore)
NEAR-SHOREGLOBAL
DELIVERY
ENGLISH LANGUAGE
REGIONAL / GLOBALDELIVERY
Service Delivery Model
• Activities which require close access to the client, such as stakeholder management, sourcing wave planning, and complex category sourcing are performed locally
• Strategic sourcing and category management activities are performed onshore / onsite and offshore based on category complexity, stakeholder alignment client requirements. Typical ratio is 50% onshore / 50% offshore
• Local delivery is supported by our regional and global category managers who provides sourcing strategy expertise
• Category support such as spend analysis and reporting are performed by local procurement specialist or performed in English from India
Strategic Procurement manages spend savings and supplier performance through our global network of category managers as well as local experts
STRATEGIC SOURCING
PROJECT SOURCING SOURCING LITE
PROJECTS
OFFSHORE DELIVERY CENTERS
ENGLISH LANGUAGE
TRANSACTIONALDELIVERY HUBS
CATEGORY SUPPORTMARKET
INTELLIGENCE SPEND ANALYSIS
EVENT (RFx) FACTORY
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Capgemini takes a comprehensive view of Category Management
• Spend Profiler• Business Intelligence
• Spend Profiler• Workflow • Business Intelligence• SLA and Operational Reporting• Contract Management
• eSourcing• Workflow • Business Intelligence• Contract Management
• Business Intelligence• Supplier Positioning• Supply Preferencing• Five Forces
Tool
s
• Spend analysis • Category intelligence packs• Benchmarking
• Cross client processes• Category specific KPI´s• Benchmarking
• Category packs• Rfx Templates and scenarios• Contract templates• Quarterly analysis
• Category Packs• Cross-client best practices• Supplier listings• Supply market intelligenceIn
telli
genc
e
Workflow and issue resolution infrastructure
Procurement Strategy & Planning
SP1.0
CategoryDevelopment
SP3.0
CategoryPlanning
SP2.0
CategoryManagement
SP4.0
1.1 Assess client environment
1.2 Perform spend analysis
1.3 Idea generation & opportunity identification
1.4 Goal & objective setting
2.1 Profile category
2.2 Create category strategy
2.3 Define, assess initiatives & prioritize
3.1 Mobilize
3.2 Continuous improvement initiative
3.3 Compliance initiative
3.4 Strategic sourcing initiative
3.5 Initiative implementation
4.1 Manage demand
4.2 Manage supply
4.3 Manage savings & compliance
4.4 Manage stakeholders
4.5 Manage risk
4.6 Manage supplier
4.7 Project based sourcing
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Savings StatusIdea Opportunity Identified Captured Realized
Initiativ
e Types
Strategi
c Sourcing
Compliance
Continuo
us Improvemen
t
AssessmentProfile
Sourcing Category
Create Sourcing Strategy
Implement ContractAnd Savings
Hypothesis Run Compliance Reports Stake-holderBuy-in Implement
Identify Need Validate Need And Develop Approach
Stake-holderBuy-in Implement
Qualify Suppliers
Source And Award
Identify & Quantify Suppliers
Develop Implement. Approach
Quantify & Validate
Opportunity
Finalize Recommendati
on
Monitor Progress
Monitor Progress
Council Tollgates
A B C D
Stakeholder agreement on project details for development
Stakeholder sign-off on approach and project execution
Stakeholder sign-off on implementation plan and savings
Project evaluation and transition to on-going maintenance
Realizing savings and ensuring client governance in all initiatives
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Capgemini‘s Spend Analysis process creates normalized, enriched data to enable sourcing and supplier optimization analysis
Analysis & Reporting
• Extract data from source systems • Load data into Spend Profiler• Aggregate and map all data files• Data validation checkpoint to
ensure accuracy and completeness of loaded data
• Data cleansing , grouping & classification
• Classify transaction data to hierarchy
• Conduct mapping workshops to review classifications, exceptions, and to ensure business accuracy
• Advanced spend reporting & analysis
• Provision of cleansed and classified data extract
• Final presentation view of Spend Analysis results
Industrialized and automated process supported by Spend solution
Data Extraction & Aggregation
Data Cleansing & Classification
Presentation MapHigh Level Solution Overview session. 1st October 2009
For industrialized outsourced categories, Capgemini maintain a library of category know-how and insight to accelerate benefit delivery and opportunity size
Market Assessment Market Competitiveness
Value Chain Assessment Sourcing Lessons
Category Insight
Market Characteristics
Historic Areas of Opportunity
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Category Intelligence is managed by a dedicated Knowledge Manager or Procurement Specialist, and is proactively updated as part of the Sourcing Close process
Profile Sourcing Category
Create Sourcing Strategy
Implement Contract
And Savings
Qualify Suppliers
Source And Award
Hardware Sourcing Initiative
Category Tree Excerpt
Category Intelligence Packs
Knowledge Harvesting Knowledge Leverage
2FACILITY MANAGEMENT
2.1 Cleaning Services
2.2 Security
2.3 Canteen
2.4 Electricity
2.5 Water and Waste Water
2.6 Heating
2.7 Waste Management
2.8 Mailroom Services
2.99 Other Facility Mgmt/Maintenance
6IT & COMMUNICATION
6.1 Hardware
6.2 Computer Peripherals
6.3 Software
6.4 IT Operations
6.5 Telecom
6.6 Data Com
6.7 Phones & Accessories
6.8Switchboard
6.99 Other IT & Communications
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Define the sponsorship
network for the commodity
Develop performance
metrics & targets to drive behavior
Develop or revise commodity
procedures & policies to
address compliance
Design/Develop
implementation & communication
Strategy/plan
Create reporting process /
tools
Design & deliver training/
communications to key
stakeholders
Identify key stakeholders
and any impact on them
3 to 6+ months based on Category
• Category managers drive and manage their specific compliance management framework and approach based on leading practices
• Extensive communication with business units, suppliers and stakeholders to ensure unique business requirements are understood and incorporated
• Category specific requirements are taken in to account for each given category
Compliance Management Framework
Capgemini Category Managers interact with Client Stakeholders to help:
• Standardize specification/rationalize items• Measure, manage and improve compliance• Gain earlier involvement in the sourcing and buying process• Build people effectiveness, education programs• Increase efficiencies
Category Management and Compliance is used by Capgemini to ensure realized savings and create sustainable improvements
Exceptions Management
Compliance Strategy
Sourcing
Channel Planning
Content Management
Communicate Policies
Category Communication
Channel Implementation
Reporting & Tracking
A
B
C
DE
F
G
H
I
Identify
Realize
CaptureRing Fence
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TRUE PLATFORM PHILOSOPHY – Procurement technology AND procurement services
ON-DEMAND DELIVERY – IBX Smart Cloud | on-demand or hybrid delivery | ISO-certified
READY TO USE – Preconfigured | digitized assets | procurement-ready supplier community
USER-FRIENDLY – Enhanced multi-channel, call-off, end-user interface
SOURCE TO CONTRACT
SOURCING SUITE
CONTRACT MANAGEMENT
SPEND ANALYSIS
SAVINGS TRACKER
SUPPLIER PERFORMANCE
PROJECT WORKFLOW
Capgemini will leverage the clients existing technology and supplement, as desired, by our leading on-demand solutions
Define Project Collect Information
Prepare Negotiation Negotiate Analyze &
Award
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Capgemini has broad Category Management experience, globally and in the Australian market
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Appendix
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Capgemini Credentials in Strategic Sourcing and Category Management (1/4)
Client Engagement Aim and Approach Overview
• A Global Strategic Sourcing programme looking at all areas of spend on a global basis, i.e..non-production, production, services and outsourced spend. Capgemini’s Strategic Sourcing methodology is being followed, key stages of which are; capability assessment, in depth commodity profiling of selected focus areas, sourcing strategy and implementation.
• Rapid Sourcing Assessment; Segmented and analysed indirect spend. Identified overall value proposition and high opportunity areas. • Strategic Sourcing Commodity Pilots (in progress); Employed Capgemini strategic sourcing methodology for five commodity pilots: office
supplies, travel, temporary labour, small package delivery, computer hardware and cellular phones (~7% of the indirect spend). Includes commodity profiling, strategy, demand management policy changes, RFPs/analysis, negotiating strategies, contracting and implementation plans.
• Organization Blueprint; Created a Commodity Sourcing & Procurement vision. Designed CSP organization structure, roles & responsibilities, key processes, and a CSP policy.
• Purchase-to Pay Future State Solution; Designed future state processes for travel, expense and capital purchases that streamlined the processes and incorporated the use of enabling e-procurement technologies.
• Scoped the processes and determined the list of suppliers• Analysed the processes and developed improvement initiatives• Developed an invitation package to suppliers asking for a partnership relationship based on preferred customers prices and improvement
initiatives• Analysed responses and developed pricing schedule and improvement initiatives• Rationalised suppliers, helped negotiate initial savings• Developed improvement agenda for future savings
• Our involvement commenced with initial assessment of client company purchasing organization, process and technology capabilities as well as estimating potential savings opportunities across several commodity groups.
• Strategic Sourcing engagement roll-out commenced with identification and implementation of “Quick Wins” opportunities, followed by traditional Commodity Sourcing comprising of direct material commodity groups totaling approximately $ 50 MM in spend and $ 100 MM in Indirect Spend.
• Significant change management responsibility was entrusted on Capgemini to manage and communicate new sourcing process as well as train and transfer knowledge to their existing personnel. Capgemini also assisted in transforming the organizational structure as well as establishing the process to make Procurement as a required core competency for the Client.
• Capgemini provided methodology, leading practice experience and knowledge, project management and coaching to all cross-functional teams involved. The first wave of the project focused on 4 commodity groups, such as Commodity Chemicals, Specialty Chemicals and Packaging Materials.
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Capgemini Credentials in Strategic Sourcing and Category Management (2/4)
Client Engagement Aim and Approach Overview
• A Sourcing Assessment was conducted across Europe, Asia and the Americas, reviewing spend, opportunities and the current Procurement capability. This culminated in a Capability Development Plan, which included a business case for the implementation of a new organisation and supporting infrastructure changes which would be implemented in parallel to several short-term cost reduction initiatives.
• A New Organisation Design was developed based upon the development of organisational design principles, the key Procurement processes and the business needs. Fundamental changes include the formation of multi-functional, Sourcing Group Teams which will operate above site level and on a regional / global basis; establishment of a Procurement Leadership team; closer integration with the New Product Development process; clear reporting lines to the executive and throughout the Procurement organisation; and senior executive alignment to key suppliers. This was supported by job profiles, RASI, recruitment processes, detailed resource plans and costs, and job evaluation (Hay Assessment).
• Programme Mobilisation necessitated the mobilisation of multifunctional Sourcing Group Teams across the globe - 22 sourcing groups, over 170 full time employees, covering over £1 billion spend. This has been enabled through strong programme management covering communications, issue management, benefits tracking and formal reporting.
• Programme Implementation involved all the sourcing groups in the development of terms of reference, conducted commodity profiling, developing sourcing group strategies and implementing initiatives to achieve annual benefits targets. Additional work has also been completed to maximise and ensure sustainability of benefits.
• Strategic Sourcing Program• Designed and assisted implementation of program• Trained resources in all aspects of required sourcing capabilities• Assisted in delivering cost reductions from negotiation to component standardization to headcount reductions• Developed sourcing vision leveraging Capgemini ASE workshop• Developed and implemented commodity specific sourcing strategies• Assisted with implementation of Component Supplier Management software package
• The objectives of the Strategic Sourcing Scoping engagement were to:-• identify those categories of indirect spend where a strategic sourcing approach could deliver realisable benefits• quantify the potential scale of those benefits• identify the techniques that could be employed to deliver those benefits
• Capgemini were engaged to support the Global Purchasing department of this FTSE 100 Life Sciences company in its search to improve purchasing effectiveness of indirect spend. The objectives of the Strategic Sourcing Scoping engagement were to:-
• identify those categories of indirect spend where a strategic sourcing approach could deliver realisable benefits• quantify the potential scale of those benefits• identify the techniques that could be employed to deliver those benefits
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Capgemini Credentials in Strategic Sourcing and Category Management (3/4)
Client Engagement Aim and Approach Overview
• The engagement covered a turnkey eProcurement implementation in 10 months starting with package selection and business case construction through to the e-Enablement of 12 commodity groups across 40+ sites and encompassing 16,000 employees. The engagement combined supply chain, change management and package implementation skills to ensure the complete success and maximum benefits to Royal and SunAlliance.
• Reviewed of 10 eProcurement point to point packages, according to the firms global requirements of purchasing goods and services resulting in a clear and objective recommendation.
• Construction of a business case with demonstrable bottom line impact.• Implementation of three commodity groups across 5 business sites within 14 weeks as first stage pilot covering over 2,500 employees.• Full push/pull integration to SAP R/3 and Lotus Notes.• Strategic sourcing across all commodity groups to improve commercial arrangements, rationalise the supply base, standardise
requirements and implement leading practice supply management techniques.• Management of implementation of Ariba across over 40 business sites covering 16,000 employees to ensure on time delivery of complete
system to Royal and SunAlliance.• e-Enablement of 12 commodity groups, including services by end of engagement.• First Ariba client in Europe to adopt Ariba Network.
• A High Level Sourcing Assessment was conducted reviewing spend, commodity suitability characteristics, and key business drivers for change. This culminated in a business case for the project and a shortlist of 6 commodities, including castings and plastic mouldings, which were then prioritised for implementation
• Programme Mobilisation necessitated the mobilisation of an internal multifunctional work team, including purchasing, engineering, and administrative staff. The internal team, plus all relevant suppliers, were fully trained on the auction tool, the overall reverse auction process, and the expectations of all stakeholders.
• Programme Implementation involved the development of terms of reference, dynamic commerce templates, event strategies, post event analysis, and planning to achieve benefits. Specific deliverables included:
• supplier search and selection• demand specification• delivery of training programme• development and implementation of event strategies• post auction analysis
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Capgemini Credentials in Strategic Sourcing and Category Management (4/4)
Client Engagement Aim and Approach Overview
• Related to this program, the airline wanted to maintain the culture and spirit of their employees in the midst of change.• An initial 10-week study was performed to identify specific recommendations for improvements.• Study identified four key areas where improvements would yield significant improvements and cost savings, based on initial process
analysis and leading practices gap analysis.• Included a comprehensive commodity program and process and organizational improvements.• The final business cases and improvement portfolio projected savings to be over $8 million in the first year.• Capgemini used the recommendations from this study to conduct a 9-month implementation program.
• A Strategic Sourcing Analysis looking at all areas of expenditure i.e. Programme-specific and Operating expenditure. Capgemini’s Strategic Sourcing methodology followed, key stages of which are; capability assessment, in-depth commodity profiling of selected focus areas, sourcing strategy and implementation.
• Capgemini are provided methodology, leading practice experience, knowledge and coaching to the client team involved.• The Analysis has focused on 18 commodity groups, such as training provision, telecommunications, travel, print and stationery and IT
equipment.• Quick win opportunities were identified and over £250,000 secured• Joint team formed with the client to implement the strategy
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Contact information
Susan BeestonVice President BTC – Business [email protected]
Capgemini7/77 King StreetSydney, NSW 2000Australia
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Marjolein DijkshoornSenior Consultant/ [email protected]
Capgemini7/77 King StreetSydney, NSW 2000Australia
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