The Category Management Process Recap

Posted by Andrew Matyas on Jul 13, 2015 11:54:20 AM

Now that you've learned about each individual step of an effective category management program, here is how they work best together to make a solid, effective management approach. 

14555354976_c54a5de9f9_z-270730-editedAs we've mentioned before, there is a solid foundation all forms of category management should be built upon. These essential qualities will ensure your categories are in good shape and in the best position to optimize savings. As long as each step is completed successfully, you'll see your company not only obtain the best savings but maintain them! 

                   Where to start?


Savings reports are the first step to creating great category management and here's why: realizing cost savings. However, savings cannot be realized without a substantial amount of gathered information. Quantifying the historical baseline of a contract will help determine savings against that baseline and ultimately guide future category management decisions and activities.

                   Ensuring consistency 

icon_2Compliance reports quantify the extent to which your company is in alignment with guidelines. Once the baseline of a contract is created during the savings reports process, it is the compliance reporting that ensures those guidelines are followed. The point of the report is to provide the data to see where  spend is not going through preferred contracts, so you can make corrections, which helps optimize savings.


                   The Reflective Process

icon_3Lost savings opportunity reporting is an extra step CoVest takes to provide an extra layer of protection on a company's spend/savings. It's essentially taking the next step from compliance reporting. The benefit is lost savings opportunity reporting can be used to quantify the potential savings lost from non-complaint spend. While compliance reports are more of a preventative process, lost savings opportunity reporting is a reflective process. It helps you see where you went wrong and prepares you for better decisions in the future. 

                   Year Over Year Savings

icon_5Speaking of protecting savings, core list rewrites are an essential process to ensure that savings negotiated with suppliers are maintained over the life of the contract. These rewrites are taking all the previous steps in the category management process to the next level; core list rewrites provide the highest level of discounts to high spend items and can drive year over year savings as new items are added. Rewrites shouldn't be a onetime thing either. Annual core list rewrites are a major aspect of maintaining savings as "churn" or turnover results in many previously high volume items not being purchased and new high volumes items being added to what is purchased. 

                   Rounding out the Process

icon_4Price auditing reports is the best way to wrap up your category management process. This report looks back on the results of each previous step and ensures that the customer receives the correct, pre-negotiated price for every contracted item they buy. It will also identify variances in pricing that can be refunded to the customer in cases when they’ve over paid for materials. Another benefit of price auditing reports is that they also provide backup documentation when issues need to be brought to the suppliers’ attention.

How CoVest Can Help?

The category management process is one that can be helpful to all aspects of your company as long as you are completing each step successfully. CoVest's category management activities extend beyond initial category implementation to include ongoing cost reduction and supplier management. These activities represent a key component of our value proposition.

Sourcing internally may require more time and resources than your company has available. CoVest Sourcing Network relieves our members of this strain. Our team spends far more time managing the specifics of each category than our members can afford, as the spend levels in these categories are relatively small for each member, but significant for the combination of CoVest's member companies. This is beneficial because the more members we have, the more spend per item we have, and the better the level discounts we can negotiate.

CoVest is an analytically driven company. CoVest provides flexible reporting that can be tailored to the member, with additional summaries or calculation alterations to meet the particular reporting needs of a member. Using CoVest as an analytical resource for price auditing and other activities is free to the members, and allows the members to redirect scarce resources to more strategic activities. 




Topics: Educational

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