SC0007 - Category management in purchasing

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Summer 2013

MBA (Supply Chain Management) Semester 4

SC0007 - Category management in purchasing - 4 credits

(Book Id B1662)

Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme.

Q1. Briefly describe the four pillars of category management.

(Breakthrough thinking ;Customer focus; Cross-functional teams; Facts and data- 10 marks, i.e. 2.5 marks) 10marks

Answer :  The four pillars are: breakthrough thinking, customer focus, use of cross-functional teams, and a facts-and-data approach .The pillars are only possible once the foundations are in place.

1. Breakthrough thinking :

A breakthrough is a step-change improvement in performance when compared with current performance. In purchasing, continuous improvement might typically represent a series of tactical negotiations with a supplier to try and keep prices as competitive as possible.

Q2. Explain opportunity analysis.

(Explanation of opportunity analysis- 3 marks; Opportunity Analysis Matrix – 4 marks; Alternative for Opportunity Analysis- 3 marks)10 marks

Answer : Opportunity analysis:

• Opportunity analysis is the strategy of assessing the potential for a change or enhancement to enhance the generation of revenue. The type of opportunity will vary, from small chances within a current production model that leads to expense reduction or increases overall efficiency, to the launch of new product lines that will increase profitability for the business as a whole.

Q3. What are the additional tools used throughout the category management process. Explain them.

(Value stream analysis, Wishful thinking tool; Customer need table; Needs analysis; Gap analysis; Pareto analysis- 10 marks, i.e. 1.67 marks each)10 marks

Answer : Tools used in category management process :

There are a number of tools described below – additional tools are included in the toolkit and are listed in various stages of the process. Tools which are essential at one stage may be useful at another and vice versa.

1. Value Stream Analysis:

Value Stream Analysis or Mapping is a qualitative and quantitative tool that describes in detail how a process operates.

Q4. Discuss implementation plan for sourcing strategies and explain its components.

(Explanation including the importance of implementation plan, barriers to implementation plan – 4 marks; vital components of the implementation plan – 6 marks) 10 marks

Answer : Implementation plan for sourcing strategies :

Strategic sourcing plans include determining processes for tenderer’s and supplier selection and performance criteria ensuring the supplier continues to meet customers' expectations. CIPS advocates the use of weighted evaluation criteria when determining the preferred options, as this is one method of persuading internal colleagues that purchasing and supply management is not focused on price and cost alone, but considers issues such as speed to market and other appropriate and relevant criteria.

Q5. Briefly explain the steps involved in options generation process.

(Step one: Development of option evaluation criteria; Step two: Generation of free-flow idea; Step three: Identify key themes; Step four: Group and summarize ideas by key themes; Step five: Compile multilayer

themed ideas into strategic options; Step six: Evaluate strategic options – 10 marks, 1.67 marks each) 10 marks

Answer : Step one: Development of option evaluation criteria:

Category Management is a technique used to understand markets, analyse spending, and make purchasing decisions that save money. Both business requirements and implementation evaluation criteria have been identified. Note that as a general rule, for the process to be workable, around seven to ten evaluation criteria are

about right for each.

Q6. There are many challenges involved in the process of category management based on the FMCG principles. Explain the challenges. 10 marks

Answer :  Challenges in category management :

FMCG category management has three basic principles:

1.Treat categories like they are individual business units, with retailer buyers responsible for category profits and

empowered to do what needs to be done in a category.

2.Treat categories within the framework of and in support of a retailer’s strategy.