Our short series of articles on the concept of visibility and what it means for Chief Procurement Officers continues this month. The response to this series has been so strong that we thought we’d continue with it to include other key parts of the source-to-settle process. Thus, today’s article highlights the top areas in which category managers need to have visibility…and what they can do to gain a better view into the process.
Category managers require a breadth and depth of visibility into supply markets unlike that of their corporate brethren. At a high level, they need to have significant supply market knowledge in order to ensure that they’re effectively managing and advising the enterprise stakeholders on the best way to source, procure, use, and manage specific categories and commodities. Category managers also need to be current on the different supplier or industry trends, such as capabilities, innovations (recent and future), pricing, supply availability, changes in the market place, supplier capabilities, and supply risk. Of course, all of these variables relate, and having visibility into all is essential for category managers to be successful in their jobs.
For example, let’s look at copper and the multiple ways that category managers need to have visibility into this commodity. For starters, category managers need to know if copper is a strategic category – if it is critical to operations or to the product itself. They also need to understand the business and technical requirements of their categories – how copper will be used, what its unique properties are, when it’s needed, and whether customers can accept substitutions. Category managers also need to know where the commodity will end up – whether it’s in an industrial engine or a baby’s mouth. In short, category managers need to understand the commodity’s importance to the business, its intended usage, and technical specifications so that they can best serve their business and its customers’ interests.
Next, category managers need to have visibility into commodity prices and trends – year-over-year changes, or whether they’re expected to rise or fall depending on supply availability (if there’s a glut of copper or a run on the commodity). Other changes in the market that category managers need to monitor include whether there’s a shift to cheaper, stronger, or more eco-friendly metals, or if copper mined from a certain supplier, region, or country is suddenly banned or at risk of being banned in the future.
It is just as important to have visibility into supplier performance and pricing as they relate to the supply market. Suppliers can be a wealth of market knowledge and can steer you in the right direction; but at the end of the day, they are motivated to keep you coming back to them and at terms favorable to them. That is why you have to independently assess whether they remain competitive in the market on performance and pricing. Are your suppliers delivering the desired quantity or quality of copper (or another commodity) for the desired price, under the desired terms and conditions, and within the desired time frame? If not, or if their capabilities have been slipping over time, category managers need to consider alternative sources – or even an alternative commodity – to mitigate category and supply risk.
Truly, category managers have many variables to monitor, manage, and advise upon. Fortunately, there are a number of tools and solutions available to category managers to ensure that they’re keeping “eyes on” all aspects of their assigned categories. For example, spend analysis solutions can give category managers greater visibility into enterprise spend – past, present, and what they can expect in the future for a given category with given suppliers, terms, and conditions. This can help category managers make more informed decisions. Supplier information management tools allow category managers to centralize and manage all the data streams emanating from their suppliers of given commodities, like copper miners, distributors, etc. Supplier performance management tools allow category managers to monitor their suppliers’ performance – if they are delivering the right commodities or amounts of commodities to the right locations, on time, on budget, or within the period of performance.
Iasta, a Selectica Company, offers a solution suite that includes all three applications – allowing suppliers to provide information on their own company, goods, and services, which enables category managers to automatically categorize, track, and retrieve supplier information for given projects and needs, including past pricing and performance. Likewise, Zycus offers a host of solutions (including iAnalyze, iSupplier and iPerform) that provide category managers with greater visibility into spend, supplier information, and supplier performance, respectively, including how much of their spend is with compliant or non-compliant suppliers. Lastly, open-source intelligence tools, like those offered from LexisNexis, allow category managers to collect loads of openly available commodity and market intelligence through interactive dashboards that can help them stay informed on the latest economic, financial, legal, political, and supply information available.
Effective category management starts with collaborating with key internal and external stakeholders and gaining visibility into the entire source-to-settle process – a daunting task considering all of its moving parts. With these four tools – spend analysis, supplier information management, supplier performance management, and open-source intelligence – category managers can monitor the key aspects of their commodities, and ensure that the procurement department is sourcing the needed goods and services for the best value to the enterprise, no matter what the market conditions or current trends are.