Category Management:  The Absolutely, Positively Most Critical Step – Bar None

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And that’s not idle hyperbole!!!  After all, if you can’t demonstrate actual delivered Value to your Stakeholders, why would they support your shared service.  And it turns out that most Supply Chain and Sourcing organizations are woefully inadequate in demonstrating actual delivered Value (if you would allow me, I would say they suck at it😊).  And there are a host of challenges they face most of which they may not be aware of.

Believe it or not, in many case it starts with not even knowing all the Stakeholders for the category.  Once that is overcome, identifying the Stakeholder’s Value Drivers (SVDs) becomes a major impediment because most Supply Chain/Sourcing teams are not comfortable with the whole concept of Value Drivers and therefore struggle with initially identifying them and then getting alignment with their Stakeholders.  Hardly any of the processes being used out there actually have components that deal with this challenge in any meaningful way.  Being caught in the trap of only looking at Quantifiable Value Drivers is quite a deep trap when in fact, it’s been proven that the Unquantifiable Value Drivers have a far greater influence on Stakeholders’ decisions and behaviors.  And of course, the biggest challenge of all – being driven by nothing else but savings under the assumption that that is the only Value Driver that Supply Chain/Sourcing is responsible for.  All of these combine to leaving massive amounts of Value either unrealized or unrecognized by our Stakeholders.  Here are some things to ponder:

  • Would it help if your Stakeholders acknowledged a significant increase in the Value they receive from your team?
  • Could your team do a better job of capturing and communicating the Value they provide?
  • Does your team still struggle with measuring the Value they provide?
  • Do you have a methodology to capture and report non quantifiable Value and have it recognized similar to quantifiable metrics?
  • Does your team struggle with getting support and alignment with your Stakeholders?

If the answer to even two of these questions is yes, you have a Value gap challenge on your hands and it may require nothing more than identifying and capturing Value that you already may be delivering.  And, if you decide to focus on this, it will actually help significantly increase the Value you are delivering.  However, it will require some modifications to your current processes so that this concept is tightly integrated because focus needs to be on it during the launch phase.  Capturing Value is not a stand-alone event but is integrated into the entire process.  It is therefore vital that you get sign-off from your stakeholders and finance in advance on what victory means (end goal) and how it will be measured (the calculation).

A systemic process of identifying SVDs when the process is launched leads to capturing lots more Value that is delivered and acknowledged by the Stakeholders.  We have encouraged all of our clients to embed this concept throughout their process and it has helped them tremendously in increasing their value proposition to their Stakeholders and allowed them to play a far more strategic role.  Their Stakeholders now know that they depend on them to achieve their goals – not just lower prices.

And here are some actual client examples where we were sourcing some categories for clients:

Not knowing who your Stakeholders are and what their Value drivers are guarantees that you are facing a significant Value gap – n’est ce pas?

 

 

 

 

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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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