The objective of Supplier Management is to ensure that the appropriate level of management is used for all suppliers to ensure that contracts deliver the agreed quality and value of the products or services, supplier performance is meeting or exceeding the organisation’s requirements, and that relationships with critical suppliers facilitate a collaborative means of maximising business value. While suppliers are the focus of Supplier Management, at the Category Management level the focus is on groups or categories of interrelated products and services. Spend categories are managed collectively to maximise the value of spend on these categories, minimise the risk and ensure control and consistency by effective management of all contracts in the category. Good Category Management practices suggest that each category of products or services requires different approaches and management strategies according to both profit and risk considerations (Figure 4). In order to effectively manage a category, organisations should be assessing their competency at managing these categories according to elements such as category knowledge, commercial understanding / awareness, business need management, compliance, contract and supplier relationship management and the motivation for category management.
Figure 4: CATEGORY PORTFOLIO
High
Leverage
Strategic
Bottleneck
Non-Critical
Low
Low
High
Supply Risk / Complexity
The overarching discipline that brings all of these levels together and provides the basis of our Procurement Building Blocks framework is Governance . Procurement Governance provides the guiding light with which a procurement and supply chain function operates and manages resources to ensure control, visibility and compliance to the procurement process. Procurement Governance sets the objectives of a procurement function and defines the role and positioning of procurement within an organisation. At all levels of the Procurement Building Blocks, organisations should be developing a clear strategy , embedding rigorous processes that support the execution of the strategy, upgrading people’s skills and adopting technology in order to implement these processes.
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