Effective Fact-Finding is the Key to Breakthrough Sourcing Strategies in Category Management
To be successful in category management, you need a wealth of facts and data for the category. This should include information on how the organization and your end customers use it, as well as current and potential suppliers in the market.
An experienced category management practitioner can secure good insights using creative ways to conduct research and through sheer hard work. It’s also quite common in some purchasing functions to have one or more researchers or data analysts on the team to provide key intelligence to category managers.
The reality of why organizations fail to use good facts and data to support developing breakthrough category strategy is not typically because it lacks the right system, but more because it is easier to cut corners or assume you already know all you need to know. Furthermore, if few expectations are set around what is required, data gathering in category management can become quite superficial.
One key success factor is the role and importance of good process rigour. This is equally important for how you use facts and data. Success requires you to establish a culture of rigorous research and analysis to support the development of great sourcing strategies. This may also help you find breakthroughs.
Introduction to data gathering
One common mistake often made by the project leader or the team when using category management is the assumption that they already possess an adequate understanding of the category, and therefore know the way forward. However, by approaching this stage with an open mind, rigorously carrying out data gathering and applying the strategic analysis tools, significant opportunities can be uncovered.
Back in 2002, at a news briefing, the then-US Secretary of Defence, Donald Rumsfeld, attempted to defend the lack of evidence linking Iraq’s government with the supply of weapons of mass destruction to terrorist groups. He famously stated:
“There are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don’t know we don't know. And if one looks throughout the history of our country and other free countries, it is the latter category that tend to be the difficult ones.”
Unsurprisingly, Rumsfield came under attack from a number of camps for what they regarded as gibberish nonsense (Girard and Girard, 2009)1, yet others praised how he concisely described the complexities of identifying things we don’t know we don’t know (Bennet and Bennet, 2004)2.
In category management, it is your focus on the things you don’t know you don’t know that holds the greatest importance, as this is where game-changing new sourcing strategies might be found.
If you’ve ever been involved in research, perhaps for a dissertation or within a research and development function, then the concept of exploring the unknown will be familiar. It’s fundamentally about deep, rigorous and inquisitive data collection and analysis that, if done properly in category management, will naturally cause a breakthrough future sourcing strategy to emerge. Unfortunately, some practitioners take shortcuts at this stage. If this part of the process is not attended to thoroughly, the results will be suboptimal.
Data gathering outputs take a number of forms ranging from reports, spreadsheets and technical papers to scribbled notes from a discussion with key individuals in the business. One critical activity is to identify and share insights along the way. If you gathered the data, then you will have a pretty good idea of what is happening in that area of the business. You may even have some good ideas in terms of what could be done differently. However, you need to share your learnings and ensure the whole team adopts the discipline of routinely doing it.
Whilst data collection should seek to keep expanding the sum of knowledge to open up previously unseen opportunities, it also needs to be planned as realistically as possible. One important activity is, therefore, to develop a data gathering plan spelling out everything that needs to be collected and by whom. These actions should then be shared among the category management project team.
In order to create the plan, the team first needs to understand what exists already and what further data is needed. This may seem obvious, but often when a group of individuals works together on projects there is no common understanding of what is already available. A particular report, some analysis or industry data that one person is familiar with and consults regularly, may be perceived as a data gap by another individual. As a result, you need an early pooling of information to determine what needs to be collected, then the data gathering plan can be developed.
Today good data gathering is in reach of us all. Increasingly we have access to new digital platforms and the internet is a fantastic source of information. In addition, there are many professional companies and websites who can provide a paid service to supplement our data gathering activities.
Developing advanced skills in internet searching can allow you to access information of greater quality and often for free. There is no right or wrong way to carry out internet searches and experimentation is the best approach. It’s also worth using a selection of search engines and desktop internet search tools, especially those focused on business such as hoovers.com. The rest is down to clarity of search terms and thinking about all the potential sources of the information needed.
Depth of data gathering
Gathering lots of data and immersing yourself in as much information as you can, will help you to see new breakthrough opportunities. But breakthroughs can also come from depth of research into just one single area.
If you are buying in volume, then a very small change somewhere to the product (or service) could yield a breakthrough result overall. If you are buying many similar products (or services) or buying from multiple sources, then the ability to make like-for-like comparisons in terms of performance or effectiveness across the range could reveal opportunities for rationalization and improvement. Here, you need to use attribute analysis to examine the individual features or attributes and identify the things you can measure that will allow you to make direct comparisons.
As consumers, we do this every day. If we are buying a desktop printer for at home, we might first ask what features it has such as whether it can print and scan, or what sizes of paper it can handle. We might then move on to look at specific areas of performance, for instance, how many pages per minute will it print, what do the consumables cost, and how many pages do the inkjet cartridges (typically) produce? We can then combine our analysis together with some usage and life-expectancy assumptions, to give us a single measure, or set of measures, that will allow us to make an unbiased comparison across printers, in other words, the cost per print.
Prudent buying here might save us $50 a year in consumables. Imagine what we could do if we were responsible for buying inkjet printers for an entire university? Just think about the difference our campus-wide intervention would make against individual purchases.
Our personal buying choices are informed by a similar measure based upon product or service attributes. Supermarkets now display ‘cost per kilo or pound’, car fuel consumption (‘mpg’ or ‘kmpl’) gets more important to us and the ‘rate per hour’ for the builder we employ needs careful consideration. Finding the equivalents within our data gathering will enable us to make direct comparisons and could help us find breakthroughs.
1 Girard, J and Girard, J A (2009) A Leader’s Guide to Knowledge Management: Drawing on the past to enhance future performance, Business Expert Press
2 Bennet, A and Bennet, D (2004) Organizational Survival in the New World: The intelligent complex adaptive system, Elsevier, Boston, MA
This article is adapted from Category Management in Purchasing (9780749482619) by Jonathan O'Brien © 2018 and reproduced by permission of Kogan Page Ltd.