Procurement Category Management Strategy for AMCO Plc

AMCO Plc is a multi-national company which manufactures electronic equipment on its five sites in Ireland, UK, USA, India and China. Currently the company’s procurement activities are decentralised across each of its five locations. The company has taken the strategic decision to centralise procurement activities into its Head Office site in Ireland.

The total spent on component parts, goods, services and equipment is approx. €200m. There is a range of common goods, services and equipment purchased on a regular basis by the majority of the sites but there are also some unique component parts, products, services and equipment which are purchased by each of the sites due to the geographic location it serves.

You have been asked to put together and lead a team of procurement professionals to device a category management strategy to support the implementation of the strategic decision.

1. What initial data and research is required in order to get comprehensive information on the spend across all the organisation, how will the team go about analysing the data and what tools could they use in order to categorise the spend. (25%)

2. How should they go about identifying the key stakeholders that need to be engaged with and what communication strategy should they employ to communicate with those stakeholders. 

3. What are the main challenges and risks that the company will face in endeavouring to implement a category management strategy across the organisation and what measures could be taken in order to overcome the challenges and mitigate against the risks.

4. Detail how the team feels the various markets that the company engages with will react to the centralised implementation of a category management strategy and how should that reaction be addressed in the proposed strategy.

5. Identify the main steps involved in implementing the category management strategy including the measures necessary to measure its performance. (20%)

Implement a strategic decision at any procurement activities, particularly in a multi-national, demands a deep understand on where the expenditures to reach excellence on strategic sourcing and category management should be applied. Therefore, prior to develop a strategy to support the requested implementation, is paramount to identify the initial data required and understand the concept and targets of a spend analysis.

According to Pandit & Marmanis (2008), a spend analysis is the starting point and provide important assistance on identifying opportunities and risks on the strategic sourcing and addresses issues regarding which types of knowledge-based services and/or goods are procured. The analysis of procurement expenditure provides reliable data which helps on decision-making of short- or long-term strategies for saving costs (Spend Analysis 101 | Complete Guide for Procurement | Sievo, 2021) as well as providing data that can be used for improvement measuring. It is, however a complex process, and embrace the gathering of all information related to answer the following questions:

• What are we buying?

• How much have we paid?

• How much have we bought?

• Who are we buying from?

• Who is buying?

• On what terms did we buy?

                
• How often do we buy?

• When did we buy it?

• Are we getting what had been promised?

• Where were the items delivered to? (geographical location)

• How does the data compare from previous years

As mentioned above, the complexity of the analysis requires for it to be broke-down typically in 4 elements as suggested by NIGP- The Institute for Public Procurement or in 6 key steps (Spend Analysis 101 | Complete Guide for Procurement | Sievo, 2021).

-Step 1: Identify information source 

-Step 2: Data Collection

-Step 3: Cleansing

-Step 4: Data Enhancement

-Step 5: Categorise

-Step 6: Data analysis