In our first post, we noted that 30% to 40% of negotiated savings never materialize during strategic category sourcing and this is because the “strategic” element is usually forgotten once the sourcing exercise is over. Strategic category sourcing is not enough to realize results, an end-to-end strategic category management lifecycle, which consists of at least nine phases, needs to be followed. In our second post, we defined each of the phases and the key activities in each phase.

In this post, we’re going to present some tips to getting the most out of each phase.

Phase 1: Rationalization

When analyzing a category, be sure to analyze it from multiple perspectives. Look at the products, the (potential) suppliers, the (potential) customers, and the level of spend. As per our last post, when looked at from a product perspective, you might put printers in with computers, but when looked at from a supplier perspective, pairing it with toner in an office suppliers (sub) category can sometimes get you a better deal.

Phase 2: Supplier Identification

Don’t just look at the major competitors to your current suppliers, or at (potential) suppliers who have called you, but open up an RFP to see who might be able to service your needs.

Phase 3: Sourcing

If you’re not sure of the best approach, call in a category expert. As per our last post, the best approach will depend on the category, market conditions, and specific organizational needs and might change from one sourcing event to the next for the category.

Phase 4: Contract Award

Once the negotiations are complete, the next step is to make sure that all of the terms and conditions are defined, not just price and delivery. It’s important to also define return and recovery, (satisfactory) performance metrics, and other factors critical to success.

Phase 5: Supplier Management

Supplier Management is not just an up-front meeting and an annual site-visit, it’s regular communication and joint problem solving. It’s working together to find ways to improve product quality and service delivery. It’s building a strong relationship that will insure quick recovery in the face of a significant supply disruption.

Phase 6: Procurement

Make sure to send a purchase order, issue a goods receipt, and demand an invoice for every shipment and do an-way match. In order to make sure savings are captured, it’s critical to make sure you are not overcharged. Also, track every return and require a credit memo from the supplier on a monthly or quarterly basis.

Phase 7: Inventory and Distribution

Optimize the warehouse layout for inventory management. It should be easy to locate, count, pick, package, and re-ship available inventory as required. Use the services of a 3PL to optimize distribution if that is not your specialty.

Phase 8: Returns Management

Implement a returns management solution to insure returns are appropriately managed.

Phase 9: Recovery Management

Implement a Supply Chain Finance solution that can accurately track returns, refurbished goods, and credit recovery.