WHAT GOOD CATEGORY MANAGEMENT LOOKS LIKE
Strategy · Budgets, return on investment and cost- savings targets are set and monitored. · There is a programme of cost-saving initiatives and operational improvements. · Category strategy is based on its contribution to profits and its supply risk and / or complexity. · Third-party spend on products and services is covered by written agreements that improve the quality of products and services and minimise the risk of no contractual coverage. · The organisation has full control and visibility of its agreements with third parties and is able to monitor compliance. · There is a total picture of business obligations and commitments. · There is low ‘maverick’ or off-contract spend. · Contracts are standardised to reflect business-wide needs, policies and requirements. · There is a full understanding of supply chains and the risks inherent within these. · There is an understanding and monitoring of the Value at Risk. · There is an appropriate balance between risk management, insurance and self- insurance. Process · Spend analysis provides insights on opportunities for cost savings. · There is an understanding of cost drivers and cost make-up. · Resources are allocated to a sourcing pipeline driven by spend analysis, the business planning process, contract management and business requirements. · Contract due diligence is conducted to address contract coverage and compliance for third-party products and services. · Contracts management is used to mitigate risks such as overpayment, failing to take advantage of rebates and discounts, lost contracts, missed opportunities to terminate contracts, and so on. · There is cross-functional collaboration on risk monitoring and mitigation.
Strategy
Category Management
Process
People
Technology
· Suppliers are engaged to develop joint contingency plans. · The risk profile of suppliers is based on their criticality and supply complexity. · Communication and escalation paths for risk management are clearly defined. People · Individuals are accountable for managing spend categories. · Staff with the required skill sets are available to conduct contract due diligence and contract management. · Staff have the ability to understand how potential threats impact their organisations. · Staff have an understanding of contractual terms and conditions and are able to represent key risks in contracts. · The legal function is engaged in contracts management, as required. · Procurement and Risk are working closely on understanding and managing the risks in the supply chain. Technology · Spend is recorded by finance according to a consistent categorisation of products and services. · A contracts management database is in place to provide a central, single source of third-party contracts and facilitate the contracts management process. · Reporting of contractual information across all categories and third parties is effective. · There is a mechanism for collecting and reporting on enterprise-wide risks and incidents. · Visibility of contracts highlights revenue generation and cost-saving opportunities, and enables risk management.
· There are mechanisms in place that generate early warnings of potential disruptions to the supply chain.
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