We started talking about this question back in January of this year and then added a Webinar series in April in response to the overwhelming interest in this topic. All I can say is WOW! Most organizations are trying to move to Category Management but are either not sure “what” it is, or “how” to get there. Our Sourcing Maturity Model outlines the various domains that need to change to arrive at today’s destination which is Category Management:
I purposely point out that Category Management is today’s destination because like any good maturity model, Category Management will shift to the left over time 🙂 ! In my opinion, the domain that represents the biggest difference (and biggest challenge) between Strategic Sourcing and Category Management is Supply and Supplier Management. This is because it is the one area that requires a huge change in attitude and mindset. Key suppliers are no longer treated as adversaries that we squeeze every last dime from – they are truly business partners that can help us not only impact the bottom line but also the top line.
This is a very difficult concept for many organizations to grasp. Treat suppliers like partners? Won’t that result in erosion of our leverage? We often suggest that clients ask their suppliers – “what could do for us if we gave you an extra $1,000 (you fill in the zeros)? What additional value could you provide? How could you help us improve our processes / grow our business?” The response we often get from our clients is a blank stare or “you’ve got to be kidding me?”. We also ask when was the last time you brought your suppliers in to discuss their business, where the industry is going and / or what innovative ideas they have for you. Nine times out of ten the answer is a resounding – NEVER.
Let’s take a look at the Supply & Supplier Management domain:
Suppliers segmented and managed as a portfolio – Supplier segmentation is critical to bring visibility to your key supplier relationships so that your most important relationships receive the most attention. We often end up spending most of our time with our problem suppliers which is simply counter-intuitive as opposed to those suppliers that provide the most value.
Suppliers assist with sales calls – Whoever heard of such a thing? Those companies that have worked with their suppliers as an extension of their own staff have reaped huge benefits. This is a practice that requires a significant shift from adversarial to collaborative.
Regular feedback given, continuous improvement strategies in place, joint planning with suppliers – Many organizations have quarterly supplier meetings that focus on tracking progress against contractual KPIs. Think about using that time for continuous improvement, relationship building or innovation – it will be time well spent.
Scorecards are in place & utilized to ensure mutual profitability – The key word here is “mutual”. How many of you have mutual scorecards focused on growing one another’s business?
Suppliers are proactively used to help reshape your business – Are you considering a new business model, introducing a new product or moving to a new geography? Why not engage your suppliers in thinking through the details and even enlist them to help? In many cases, they are valuable experts that we keep at arms-length and fail to engage.
You are considered to be a “customer of choice” with your supply base – There are numerous research studies (particularly in the auto industry) that quantify the value of strong supplier relationships. Customers of choice often get best pricing, best resources, innovation, etc. We need to stop thinking of our suppliers as the enemy and embrace the value they can provide.
We have numerous clients that still believe that leverage is created by an “us vs. them” attitude. We have found that “relationship” matters. If you want to help your organization move to Category Management you MUST start by changing the attitude toward suppliers and help others see how suppliers can play a key role in your business.
Let us know what you think and join in the conversation . . . .