Category Management : How Much Value is Your Company Wasting?? Or – Why I Can’t Drive a Rental Car Anymore!!!

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My 10-year-old supposed “luxury” car is in the shop and I ended up having to rent a car. I don’t know the last time you rented a car but I found the experience to be terrifying and that’s not an exaggeration. I almost turned around to ask for an older car that I could drive. I don’t think cockpits of small planes are that complicated and I’m not being humorous here.

Here are some pictures of what I faced – and this is not even a complete picture of numerous other controls and knobs all around me.

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This is what greeted me on the steering wheel as I entered the car. There are 21 – yes 21 different positions for the 8 different controls on the steering wheel and as you can clearly see, a number of them are totally unmarked. The only way to find out what they do is to press them and hope that you can tell what that button did IF it did not eject you from the car.

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This is what greets you right above the steering wheel (remember the 8 controls with 21 different options) with displays that are constantly changing from one screen to another. 

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This is just to the right of the steering wheel on the dashboard. A fairly large screen with tons of options to maneuver through. And no, I’m not a Taylor Swift fan but I was too scared to try to figure out how to change it. And why I need to know that I’m listening to her on two adjacent screens is beyond me.

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And right below the above screen is another large control panel with yet more options. And you can see just below it even more controls and options.

My frustration got me thinking about how much extra cost was incurred by the manufacturer and therefore the consumer to add so much additional Value to the product. The more important point is to then think about how much Value is being paid for and then wasted. I would feel pretty safe in assuming that the amount of Value being actually realized by the consumer is far less than what the manufacturer designed into it and what the consumer has paid for. For arguments sake, let’s assume that the Value of a vehicle is 50% in getting you from A to B and 50% is all the added features and functionality that may have nothing to do with the former. If you paid $50K for the car, that means $25K is what the added features (Value) cost you. If you are realizing 90% (a very high number) of the added Value, your wasted Value is $2,500. More realistically, the average consumer is probably realizing 60% of the added features thus incurring wasted Value to the tune of $10,000! You may think I’m wildly exaggerating but I can assure you I’m not that far off..

But let’s assume that it’s between $2,500 (5%) and $10,000 (20%).  The challenge for us in Category Management is how much Wasted Value is there in each of our categories? And if you multiply these percentages by the spend on your category, does it at least make you pause for a moment. Even if my percentages are off significantly, it should still be a number that makes us think. Have we identified what is of Value to our stakeholders as defined by them? Are we utilizing ALL the value that we are paying for (Adoption)? Is there more Value that the suppliers can provide that we are not acknowledging and realizing (Supplier Relationship Management Optimization)? All of these and many more contribute to Wasted Value and we should not need any more quantification than this to incorporate it into our metrics for Category Management!

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Dalip Raheja is President and CEO of The Mpower Group (TMG). Dalip has over 30 years of experience managing large organizations and change initiatives. He has worked across the spectrums of supply chain management, strategic sourcing, and management consulting.
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