Topic 5 - Category Management

Question 1

Objective of Category Management

Answer 1

Segments the main areas of organisational spend on goods and services into distinct groups, and manage the budget and spending based on these groups

Question 2

Ways to manage categories spend

Answer 2

1. Supply base optimisation
2. Total quality management of suppliers
3. Global sourcing
4. Longer term supplier relationships
5. Early supplier design involvement
6. Supplier development
7. TCO analysis
8. Kraljic Portfolio analysis

Question 3

Kraljic Portfolio Analysis

Answer 3

Risk (R)
Value (V)

Leverage: (Low R, High V)
Critical (High R, High V)
Bottleneck (High R, Low V)
Routine (Low R, Low V)

Question 4

Routine Commodity

Answer 4

Strategy: Efficient processing, Simplify acquisition process
Tactics: Increase role of systems, reduce buying efforts
Actions: Automate requisitioning, stockless procurement, minimise admin costs, little negotiations

Question 5

Bottleneck Commodity

Answer 5

Strategy: Ensure volume and supply continuity + timely delivery
Tactics: Decrease uniqueness of suppliers
Actions: Widen specs, increase competition, develop new suppliers, medium-term contracts, attempt competitive bidding

Question 6

Critical Commodity

Answer 6

Strategy: For win-win, diversify, exploit
Tactics: Increase role of suppliers
Actions: Heavy negotiation, supplier process management, prepare contingency plans, analyse market competition to determine buyer’s strength

Question 7

Leverage Commodity

Answer 7

Strategy: Exploit, maximise commercial advantage and power over suppliers
Tactics: Concentrate business, maintain competition, focus on cost savings
Actions: Promote competitive bidding, exploit market cycles/trends, procurement coordination, use industry standards