Category sourcing: developing effective sourcing strategies - How to identify cost-savings potential
3 important questions on Category sourcing: developing effective sourcing strategies - How to identify cost-savings potential
How do you have to identify cost-savings potentials?
Any cost saving program in purchasing starts with a thorough analysis of the company’s purchasing spend by means of a cube. Based on this, a category tree is set-up, which identifies the company’s most important direct and indirect spend categories. It is defined as: a group of coherent products or services, bought from the supply market that are used in our company to satisfy internal and external customer’s demand.
In assessing the cost-saving potential of a certain spend category, purchasing managers may use different criteria. Cost-savings potential may be dependent on the following factors:
-Customized versus standard (off-the-shelf) specification
-Modular versus component buying
-Buyer-supplier dependence
-Number of suppliers involved in last tender
-Scope of last tender
-Type and age of contract
-Market price versus cost price differential
Level of purchasing involvement
-Modular versus component buying
-Buyer-supplier dependence
-Number of suppliers involved in last tender
-Scope of last tender
-Type and age of contract
-Market price versus cost price differential
Level of purchasing involvement
Which activities are required to conduct a feasibility study?
-Definition of category and sub-categories
-Overview of current and future purchasing spend
-Most important stakeholders and actors involved
-Analysis of current supply base
-Future company requirements and needs
-Legalization that may affect requirements and buying process.
-Overview of resources that are needed to build and implement detailed category sourcing plan (identifies the sourcing strategy for a certain category)
Picture: purchasing prioritization matrix
-Overview of current and future purchasing spend
-Most important stakeholders and actors involved
-Analysis of current supply base
-Future company requirements and needs
-Legalization that may affect requirements and buying process.
-Overview of resources that are needed to build and implement detailed category sourcing plan (identifies the sourcing strategy for a certain category)
Picture: purchasing prioritization matrix
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