Question

How do you use category strategy development in your daily life?

300 word minumum please, but please type it, and do not write it on paper.

Answer 1

Category strategy development

The theoretical basis of the category strategy development framework is summarized as follows:

• Market based view - external analysis - identity of key success factors
• Resource based view - internal analysis; identify core competencies
• Strategic options - SWOT analysis, and, generic strategies

Categorization is done into:

• Strategic items - high supply risk, high profit impact
• Bottleneck items - high supply risk, low profit impact
• Leverage items - low supply risk, high profit impact
• Non-critical items - low supply risk, low profit impact

As per Krlajic, for each kind of strategic item, the purchased materials can be classified into required main tasks, decision level, and, required information.

Evaluation criteria are supplier strength, and, company strength

Supplier strength

• Capacity utilization, or, bottleneck risk
• Return on capital, and, return on investment
• Competitive structure
• Bottleneck risk, or, capacity utilization
• Market growth versus capacity growth
• Market size vs. supplier capacity
• break even stability

Company strength

• capacity utilization of main units
• profitability of main end products
• market share vis a vis main competition
• demand growth vs. capacity growth
• purchasing volume vs. capacity of main units
• cost of non delivery

Category management carries out the following activities:

• Understand business unit requirement for service or product
• Develop contract strategy and negotiation strategy
• research on characteristics of supply market, and, capability to fulfil the requirements
• Establish capabilities aligning with business requirements, and, evaluating specific suppliers
• working on a strategy to align demand requirements, and, supply capabilities
• Determining price, cost issues, and, optimal relationship characteristics
• Developing the contract after executing negotiation
• Establishing a basis for transitioning the responsibility to appropriate stakeholders, and, ongoing management & continuous improvement of supplier management for the category

Category manager involves the following

• Engaging with internal stakeholders, and, fully understanding their requirements for services & products
• Scanning the marketplace to understand cost drivers, market trends, and, risks
• building a strategy to align realities of the supply market, and, stakeholder requirements