The Essentials of Category Management - Essay Example

Contents List of Figures 3 1.0 Introduction 4 1.1 Benefits from Category Management, Strategic Sourcing & Expenditure 4 2.0 Methodology 6 2.1 Category Planning 7 2.1.1 Spend Analysis 7 2.1.2 Agency Needs Analysis 7 2.1.3 Market Analysis 8 2.1.4 Category Execution 9 2.1.5 Supplier Management 10 4.0 Application of Tools and Technique Used in Implementing Category Management 10 4.1 Time for Category Management 11 4.2 Information In Category Management 11 4.4 How Tools And Implementation Strategies Can Help In Category Management 13 4.5 Case Study 14 4.6 Benefits Of Category Management 15 4.6.1 Productivity 15 4.6.2 Resilience 15 4.6.3 Precision 15 5.0 Recommendations For Modern Category Management 15 6.0 References List 17 List of Figures Table 1: Etihad’s benefits on the Proposed Framework Table 2: Methodology of Implementing Category Management Table 3: Stakeholder Priorities Map Table 4: Marketing Analysis Tools Table 5: Demand Management Achievement Table 6: How a Category Manager Can Spend his Morning Hours Table 7: An example of specialist support for category management (European National Retailer) Figure 1: An example of the Experts in the Pricing and Performance Groups Category Management 1.0 Introduction Category management, among various definitions, can be understood as putting products and commodities into groups based on how consumers prefer using the products. As such, the system advocates for increasing retail growth sales and profit through inhibiting unproductive competition while maximizing synergies within the company brands and products (Porter, 2012). In a wider scope, the assumptions towards category management imply that the system involves a diversified interrelated activity, flexibility for fitness in companies, involves retailers, distributors, wholesalers, brokers, partner manufacturer and a solid infrastructure. Additionally, the system does not only focus on reducing costs but improving the results to favor consumers and good relationship between trading and servicing partners (UPS Supply Chain Solutions, 2012). Among companies like Michelin Tyre manufacturer and Rekitt Benkiser products using this system, it is advisable that Etihad Airways implement it as a must use program. The main aspect when defining category management is the supply market. The system provides the opportunity to organizations to look into the market and find multiple suppliers that can provide the same service but with different ways and additional benefits. As such, category management recommends towards avoiding single source supplier unless it’s monopoly supplier. 1.1 Benefits from Category Management, Strategic Sourcing & Expenditure The use of category management and strategic sourcing pose some added advantages in organizations. The benefits range from improvement in service delivery reduces risk in the supply chain, delivering a standard procurement solution, advocates for the effective use of resources and enabling the supplier capability development (ADR International, 2012). As such, the system is very beneficial at Etihad Airways. Employing category management at Etihad might contribute towards consistent global service capabilities, delivery of cost savings, fulfilling customer’s flight demands, capabilities of managing supplier partnership and the company ability to meet the demand of the changing travel environment. The Airline Company through first data might assist the company to realize the importance of category management by employing tools like the seven-step assessment & Porters Five Forces of Competitive Position. Additionally, the system offers a behavioral Management opportunity to the company through choosing preferred suppliers, an improvement on online booking tools, advance purchase and structuring low fare possibilities (Delta Business Travel News, 2012). Trough the detailed discussion of the above implementation of benefits of category management and strategic sourcing, the diagram below indicates how the Etihad Airways Company might benefit from the designed framework. Table 1: Etihad’s benefits on the Proposed Framework Outputs Under & over-representation of the current & potential Etihad Customers Insights /recommendation Identifying of the targeted consumers. One of the options is the choosing of existing of over-represented Etihad Customers or choosing the under-represented customers as opportunity for focus Additional Analysis Continual use of category management is annually determining the system Strengths & weaknesses in airline industry it is essential to determine Regional variations & consumer trends in the air travel industry. Managing both internal & external expenditure by using category management proves to be challenging. The problematic is viewed as big spend Management. To justify the situation, the system decides to use airways transportation as an aspect to save of expenditure. The transport approach is both an internal and external expenditure. The system is considered as a procurement & transport management issue. To effectively save on the expenditure, the strategically sourced group needs to work on logistics and procurement using togetherness approach. Working together assist in saving the expenditure through making the good decision, management of the transportation process and the spending regardless of whether its internal spending, tier- one supplier spending or involving a different spend category (Spend Matters, 2013). 2.0 Methodology The methodology of implementing category management for an effective model adjudicates for its continual operating process. As such, the development of category management model requires a strategic plan, the possibility of category execution & performance management to greatly meet the expectation of implementing of category management (CIPS, 2013). Table 2: Methodology of Implementing Category Management 2.1 Category Planning 2.1.1 Spend Analysis The approach begins with the gathering of data hence compiling for analysis to be made. The actual data needs to be pulled from Etihad Company sources especially the company purchase record, the financial systems and essential data from the suppliers. As such, all the collected number are assembled & reconciled to form a clear spend picture of the company. Additionally, the procedural at this phase proposes for the cleanse of data, removing of the duplicated data, removing the non-category spend, analyzing & assessing the data then lastly identifying the opportunities for Etihad Airways (Guidance Document, 2015) 2.1.2 Agency Needs Analysis The two designed category teams need to engage with the collection of inputs and analysis from Etihad company to pose the expectation of the company needs, gaps & possible opportunities prices offerings, processes either in bookings or identifying an opportunity towards the improvement of the company (Aberdeen Group, 2014) Some of the well-involved aspects at this phase includes supply assurance, Quality, Service, regulatory, commercial, innovations, surveys interviews & engaging into Etihad workshops. Additionally, the company requirement prioritization feedback arises at this phase. The easiest tool to assess the feedback is the use of simple stakeholders priorities map as shown below. Table 3: Stakeholder Priorities Map Source: Dumont, 2013 Requirements Requirement details Agency 1 Agency 2 Avg. by Requirements Regulatory Supply solutions, federal standards & target for socio-economic Assurance of Supply Exact delivery time, robust problem managements solution & short lead time Quality No complaints from customers & product delivery of 10% tolerance Service Supplier responsiveness to changes & accountability Cost/Commercial Average purchase or price capabilities, identify cost reductions projects & possibilities of savings Innovation Leader in total supply innovation, interest in partnerships & R& D greater than budget Average 2.1.3 Market Analysis For Etihad Airways company full realization of being competitive in some geographical location or internationally, the Airline company need to develop through research the understanding of market fluctuations, market influencing factors and the company motivators. The diagram below shows the various market analysis tools that can be employed by Category management in Etihad Airline. Table 4: Marketing Analysis Tools Analytic Tools Description Market Segmentation This focuses on the company cost, success, challenges & the company current state market condition. Five Force Analysis The focus is on rivalry among the established & emerging competitors, possibilities of suppliers & buyers bargaining power, threat of new entrant & threat of substitute of products and services Market Trend This includes technological advancement, Etihad capacity issues, and economic demand for the company, profit margin & government regulations. Supplier Chain Focus is on supplier market size and the possibility of offering alternative services at the Airways company Cost Structure The analysis made at this phase identifies the cost of each activity within the company & its importance. The cost is also linked the overall cost on good sourced Profile of Major Player The Etihad Airline company displays on its profile the services and goods offered. In the company premises, the company overviews leadership & financial the company premises, the overview company leadership & financial achievements 2.1.4 Category Execution Category execution firstly focuses on customer demand. It is essential for Etihad Airways since it not only focus on the company reduced cost but also on the company existing behavior. Improvements are recorded through standardized products and service specification that prevent the possibilities of unnecessary consumption (Dumont, 2013). The diagram below shows how Etihad Airways might achieve Demand management under Category execution. Table 5: Demand Management Achievement 2.1.5 Supplier Management The system involves the supplier performance attitude towards the Etihad Airways. As such, it is recommended for the supplier to build a strong relationship with a company especially in products supplied and a good example is the flight spare parts (Category Management, 2012) 4.0 Application of Tools and Technique Used in Implementing Category Management Category management sounds like a very easy and direct ideas that can help retailers in the management of every of their products in order for the products to make a good appeal to their customers. The category manager should be able to become the general manager a specific business unit, and rather not a common buyer just trying to purchase a procure product. The trading department should focus on their customer proposition, relevant assortments, competitive pricing and good visual merchandising, this is according to [Oli12]. [Jam13]Believes that three tools should be used to good advantage for category management to deliver on its promise: i. Time: this states that the category managers should be able to dedicate a lot of time in actually being category managers. ii. Information: there is a greater need for the category managers to have the correct information for making the right decision and iii. Skills: there is a need for the category manager to be supported by various specialists in various areas who have deep expertise. 4.1 Time for Category Management In category management, there are always complaints about the lack of time by the category managers to manage their categories. Occasionally when people are overburdened with a lot of tasks, they will tend to focus on the days immediate activities while pushing aside the challenges of tomorrow. Category management strategies will tend to take second place to the normal day to day activities as they involve a longer time scale as compared to the other activities[Sir11]. Time is a very important tool in category management, and the category managers should make sure that it does not become an obstacle. 4.2 Information In Category Management Different categories have different SKUs; it may be easy to figure out the best price architecture, maximizing customer appeal, best financial performance and the product assortment, data collection a specific period will always mask the truth. Most retailers are considered to be rich in data but have poor insight. There is a lot of available data about the various categories management strategies, but it is the methods of acquiring it in theory that are difficult and a very long journey through different information systems. Decision support tools should be implemented to help the category managers in making good decisions about a certain issue. Most retailers have nowadays embarked on using computerized systems that reduce their dependency on incomplete and inadequate data. The category managers should be able to ensure that when such new systems are in place they achieve their goals in ensuring that the goals of category management are realized[Ber14] Table 6: How a Category Manager Can Spend his Morning Hours Time/day Monday Tuesday Wednesday Thursday Friday 0800 Review activities of competitor Preparing for the supply negotiation Internal meeting about performance Data entry Planning promotions 0900 Analyzing past week performance Prepare presentation of past week performance Prepare supply negotiation Supplier presentation Fixing bad cost data 1000 Requesting reports Call supplier Meeting for pricing Approving buys 1100 Reviewing competitors Data entry and validation Sorting distribution issues Reviewing pricing Meeting for store issues 4.3 Skills In Category Management Skills can be an important tool in category management, the category managers might have enough time and information, but they will still need good expertise in various fields from designing commodities to the preference of the clients to building more appropriate budgets. Customer preference covers a wide variety of banners and geographical areas, so it is important for the category managers to focus on small specific marketplaces hence the need for experts in those particular fields. Table 7: An example of specialist support for category management (European National Retailer) Source: Salmon, 2014 Point Of Departure For The Journey Approach Sustaining The Results Historically very good results, but there is a steep decline in performance. Use of the incremental approach technique to change. Wins will generate trust from the organization Need for the establishment of an expert support team for each of the major trading levels within the organization. Figure 1: An example of the Experts in the Pricing and Performance Groups Source: Salmon, 2014 4.4 How Tools And Implementation Strategies Can Help In Category Management Manufacturers and consumers that are committed to the category management can improve their business performance and the overall returns of their CM. Companies should change from the project based category management to the more effective day to day continuous category management. In order to achieve this goal, these organizations should adhere to the following three techniques[The11] Tool 1: Improve. This is perhaps the most important strategy, as there is a need to improve information quality that is responsible for feeding into the eight step category management process[Kur14]. Improving the quality of information will allow a more appropriate data sharing methods between the interested trading partners and it will also ensure that all of the involved parties have a consisted view of the market, the consumer reality and the store. Tool 2: Streamline. Streamlining the 8 process steps will improve the consistency of data through automation. The use of new technologies application can help in accessing the needed information rapidly, parsing data into more appropriate templates and converting the files into flexible formats that can assist in decision making or in the presentations[ECR12]. Tool 3: Integrate. Category management needs the users to integrate the new information into the day to day decision making activities and by working through all the organization in terms of manufacturing and retailing. With this idea, the role of local decision making will be left to the store manager together with the real time feedback. 4.5 Case Study For the Etihad airways, specific data provided by their specialists is turned in valuable information, the experts uses this information to make rapid decisions regarding maintenance while at the same time maintaining technology leadership. The decision-making tool will benefit the customers using the Etihad Airways as they will experience fewer flight delays and better reliability. The Etihad Airways are also adopting the use of SITA Crew tablet to assist the crew in assessing any customer information through the tablets. Therefore getting the information and integrating it is a very important tool in the implementation of category management[Mar15]. 4.6 Benefits Of Category Management 4.6.1 Productivity Establishment of the category management with its optimal trends, information and processes will help in developing plans for a shorter period. 4.6.2 Resilience The category managers should be able to possess tools that can accurately develop and manage the various categories as well as the necessary model changes to assist in the required development. 4.6.3 Precision Warehousing, data collection, and data integration can be established to provide real-time, reliable and precise data for the category managers who in turn can use this information to model real-time information[Lar15]. 5.0 Recommendations For Modern Category Management The traditional category management strategies are very old techniques in the modern world; therefore the suppliers need new solutions and strategies to improve their appeal to their customers. In these modern times, the best category management embraces a wider set of capabilities than those of the past. Some of these new capabilities include: macro space allocation, assortment planning, category strategy and roles, the private brand development, and joint business planning. Most of the leading manufacturers are already planning on for the changes to the techniques and tools that are needed to define the mentioned capabilities and also define the new and most efficient ways of managing and planning these categories. Some of the factors to be considered by the retailers for them to tackle the historical problems regarding category management are: i. Centricity of the Customers: the customer hold most if not all of the cards, as such, it is important for the manufacturers to be very attentive to the expectations of the customers. As a result, everyone involved in the category management should give his or her main focus on the issue of the customer’s demands ii. True integration: fully integrated systems in modern days are providing the largest benefits in organizations. The availability of software platforms has made it possible to reduce the gap found between planning, functioning, and execution areas. True integration has made it possible to change how processes are being executed. iii. Strong strategies in category management: a very strong category strategy makes a well-crafted process that defines the main game plan for the specific category with its main steps, the needed investments, and the anticipated financial benefits. As difficult as it is, transforming the category management is a necessity. More and more manufacturers are starting to address this issues that are why according to RSR, 78% of the retailers are planning on revamping their category management. The retailers who will be able to transform their category management will benefit a lot shortly[Kur12]. 6.0 References List Aberdeen Group. (2014) Best Practice in Spending Analysis. ADR International. (2012) Advanced Category Management. CIPS South African Conference. Barco, J. (2013). 2013. A journal On Category Management, 12-14. Category Management. (2012) The Effective way of Managing Retail Business. CIPS. (2013). Category Management In Procurement & Supply Delta Business Travel News. (2012). Travel Category Management: A Continuous Process at First Data. Dumont, R. (2013) Purchasing Category Management in Practice. Supply Chain Management. Demeure, B. (2014). Category Management: How category managers spend their time and information. Paris. ECR 2000. (2012). Day-Day Category Management. Accenture. Guidance Document. (2015) Government-Wide Category Management. Koester, L. (2015). Building a Category Management Capability. Cleveland: UPS supply chain Solutions. Porter, D. (2012) Category Management. CIPS South Wales Branch. PMMS Consulting Group. Rijmenam, M. (2015). How Etihad Uses Big Data To reach its Destination. Social Media Collective publisherrs. Salmon, K. (2012, May 7). Seven Facets Of Modern Category Management. Retrieved November 3, 2015, from Kurt Salmon: www.kurtsalmon.com/en-us/retail/vertical-insight/827/seven-facets-of-modern-category-management Salmon, K. (2014). Efficient Consumer Response: Enhancing Consumer Value in the Grocery Industry. Berlin: Published by the food marketing industry. Siemssen, S. (2011). Category Management. The journal of Central European retail Practice, 23-25. Spend Matters. (2012) Supercharging Category Management. Free Yourself from Siloed Sourcing to Unlock Break through Value. The partnering Group. (2011). Enhancing the Competitiveness of the independent Retailer. In- Store Implementation, 4-7. Wyman, O. (2012). Making Category Management Work. Chicago: betwick publishers. UPS Supply Chain Solutions. (2012) Building Category Management Capabilities. Grocery Manufacturers of America. 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