Category Archives: Category Management

Craft Category Strategy Like a Chief with akirolabs

As much as many vendors and consultancies would like to tell you that category strategy selection can be automated whenever you need to kick off a new sourcing cycle, because “it just depends on the supply vs demand imbalance and based on that you either do an auction (if [way] more supply than demand), do an RFP (about balanced), or renegotiate with the incumbent for a contract extension (if there is [projected to be] a lack of supply)“, that’s simply NOT the case, especially for highly strategic, specialized, or evolving categories.

The reality is that category strategy depends on much, much more than this. Factors it depends on include, but are not limited to:

  • supply vs demand
  • current and projected spend
  • current relationships
  • innovation requirements
  • environmental requirements
  • industry and regulatory requirements
  • risk factors
  • regional differences between source / make / sink
  • etc. etc. etc.

That’s why we have so many methodologies to arrive at a strategy including, but not limited to:

  • Porter’s 5 forces
  • Kraljic Matrix
  • SWOT
  • PESTLE
  • etc.

All of which serve a purpose and give us insights, but none of which actually give us a strategy. Consider Porter’s five forces — it provides insights into the current market, but then we decide what to do with that. Consider the Kraljic Matrix. It tells us whether an item is non-critical, bottleneck, leverage, or strategic based on an analysis of risk/complexity vs. profit impact, but we still have to decide what strategy to use, and, more importantly, how to evaluate the responses based on non-price factors that are also important to us (such as supply assurance, carbon / GHG reduction, etc.). SWOT helps us identify the responses, but we still need a strategy to evaluate them against. PESTLE is one of the more complete analyses of external factors encompassing Political, Economic, Sociological, Technological, Legal and Environmental factors, but you still have to build a strategy on that.

Plus, it’s not just the external factors these methodologies are based on that’s relevant. It’s internal factors that include, but are not limited to:

  • current and projected category spend
  • current relationships
  • organizational culture and process
  • organizational direction and goals
  • stakeholder needs
  • etc.

All of this needs to be considered simultaneously with the external factors and analytic methodologies described above in order to arrive at a proper, acceptable, and executable strategy — and a strategy is not a strategy if it is not:

  • proper : an inappropriate strategy will NOT lead the desired results
  • acceptable : if the stakeholders don’t buy in, your project won’t go anywhere, and you may have to start over (or just continue with the status quo)
  • executable : a strategy that doesn’t provide actionable guidance cannot be executed and isn’t really a strategy at all

And that’s what akirolabs, challenging the 40-year old Kraljic matrix as the de-facto standard in category management, is building — an augmented intelligence (because they fully realize that no Artificially Idiotic technology can ever do something that requires real human intelligence and experience) solution that helps category managers build proper, acceptable, and executable strategies and do so in weeks, not months, and see the results in months, not quarters.

The akirolab platform guides you through an analyze/strategize/realize process where it helps a category manager, or management team in a larger organization, collaboratively analyze the company and market factors, develop a strategy based on value levers and strategic scenario modelling, and then realize the strategy using the project and performance management capabilities (not found in most strategic sourcing applications).

In the Analyze phase, the company pulls in the following company data:

  • current spend (it just pulls in your current spend cube in a frame; it’s only volume tier and trend that’s relevant for strategy, not minutiae transaction details)
  • current budget (based upon projections)
  • current contracts (which formalize relationships)
  • stakeholder mapping (who is involved, and how)
  • strategy & requirements survey (what do the stakeholders need, why, and what are their goals and concerns)

… and the following market data …

  • market intel – articles, studies, white papers, etc. found by an appropriately trained semantic search engine
  • innovation factors and data
  • cost drivers relevant for the category
  • risks and associated data
  • supplier preferences (based upon relationships, innovation, and supplier risks)

… and then completes the following analyses, with the help of the akirolabs platform:

  • Porter’s Five Forces — where the category team scores and ranks the relevant factors in each force (which can be seeded from market data using the AI if enough data is available)
  • Kraljic Matrix — where the category team evaluates the risk/complexity vs. cost (and where the platform can suggest risk/complexity based upon available market intelligence, risk data, and innovation factors)
  • PESTLE — where the category management team can complete a full PESTLE analysis using all of the available data and the aforementioned Porter’s Five Forces and Kraljic Matrix
  • SWOT — where all of the above is fused into a category SWOT analysis

And the best part about its analyze capabilities is that the strategies can be analyzed by region (or by department if each department has different needs and/or goals for the products in the category), scored and weighted separately, and then overlaid visually (using a spider graph in the case of Porter’s Five Forces) to allow a team to see the average as well as the regional, departmental, etc. differentiations.

Another unique feature is its approach to SWOT. For each quadrant, they define key questions and key parameters to ensure that the analysis is done consistently (and comparably) across categories, and to ensure that the category management team collects the right information in order to generate a good strategy.

In the Strategize phase, the category management team identifies the value levers and then creates a strategy using Strategic Scenario Modelling. Using the akirolabs strategic scenario modelling capability, a category team can build a strategy that balances cost savings, sustainability, supply chain resilience, procurement agility, innovation, quality, regulatory requirements, and growth potential by evaluating multiple scenarios inspired by the market analysis in the analyze phase. These can be overlaid graphically to provide a visual comparison of the strengths and weaknesses of different scenarios.

They can pull in the relevant information from the analyze phase, and define the strategy that will be applied as well as their reasoning as to why, backed up by all of the relevant analysis and data. They can then create Executive summaries for each executive (CEO, CFO, COO, CIO, etc.) that explains the strategy, rationale, and expected results. The platform allows the team to create standard report templates by function and makes it super easy to pull in the relevant data and graphs that explains and supports the decision.

And all of this can be done collaboratively, as it was designed to allow all stakeholders to answer the survey and all team members to work together to collect the data, associate it with the appropriate analysis, score appropriately, and collaborate on the strategy using the built in messaging platform.

Finally, as part of the Strategize phase, a category management team can assess the sustainability of the scenarios using their “Procurement with Purpose” view that assess the strategy against each of the 17 interlinked Sustainable Development Goals of the United Nations.

Once the strategy has been defined and accepted, the category management team can create a project plan and track it in the “Project and Performance Management”. They can track the stages and activities, timelines, responsibilities, status, assigned value category, expected financial effect, forecasted financial benefit, etc.

If this sounds good to you, you’re probably one of the target customers, that fall into three categories where they can provide you with great value (4.4x as per their claim):

  1. Mature Procurement Organizations: leaders (under analyst frameworks) or best-in-class (under the Hackett numbers) organizations that are high on the maturity ladder and that are looking to go beyond savings and expand the core business
  2. Maturing, But Fragmented, Procuring Organizations: average to average-plus maturity, but no centre of excellence, no history of formally captured category strategy development, and little experience bringing stakeholders together across regions and departments (leading to fragmented category events)
  3. Immature, but Growing: and, most importantly, ready to invest the time and effort to formally mature as a Procurement organization by embracing a world-class methodology and platform to jump-start their efforts and success

And if you’re still on the fence, it doesn’t just support traditional “Category” strategy. It also supports “Beyond Category” for organizations that want to use it for supply chain design, logistics & warehousing, sustainability improvements, etc. Not just traditional material or procurement hierarchy categories. And that’s a differentiator. If any of this sounds good to you, be sure to check akirolabs out.

Part Analytics Get PARTicular About Your Electronics-Enabled Supply Chain and Source Smarter with Deep ANALYTICS-based Insight

Over the past few years a few vendors have come out of the factories to support your direct-specific supply chain, but there’s still only a few that specialize in the Electronics Supply Chain (especially when you include deep sourcing [automation] support) and PartAnalytics is one that you may not have heard of, but definitely should know of given their ability to drastically reduce direct sourcing times for electronics components while reducing costs, lead-times, uncertainty, and compliance.

Part Analytics was founded in 2019 to increase open collaboration between Original Equipment Manufacturers (OEMs), Electronics Manufacturing Services (EMS), and suppliers, starting with a comprehensive, standardized source of information for direct components and materials used in electronics-based manufacturing. This would allow demand and supply information to be shared, costs and lead times to be better managed, and supply chain risks minimized. Founded by global sourcing professionals with expertise in electronic and electro-mechanical supply chains, they applied their deep knowledge of products and buying processes to build a solution that would not only simplify the sourcing process for components and bills of material, but also allow much of it to be automated.

The Part Analytics solution is split into four primary modules (which can be accompanied by a fifth that serves as a cross-platform executive dashboard):

  • Part IQ: Contains detailed part data for the electronic / electro-mechanical parts the organization sources
  • BOM IQ: Contains detailed information on BOMs used by the organization (for sourcing purposes)
  • Category IQ: Aggregates part information across BOMs to provide insights into demand, benchmarks, commodity, and supplier risk information and provide analytical insights to reduce spend, lead-time, and risk
  • RFQ IQ: deep RFQ functionality for sourcing (automation) on a Total Cost Basis (TCB) (with up to 97% manual time savings once an event has been setup)

In this article, we will look at each module individually, after noting that since Part Analytics is focused on the electronic and electro-mechanical supply chains, most of the sourcing projects (60% to 70%) revolve around PCBs (Printed Circuit Boards, not Polychlorinated Biphenyls) and related components. As a result, the focus of most of their customers is on part and material cost and lead-time optimization in those categories specifically, which is why their central focus in Part IQ is on those components.

Part IQ

Part IQ is the global supplier parts library that

  • represents the integrated catalog across all suppliers,
  • maintains the organization AVLs (Approved Vendor Lists)
  • maintains Part Analytics‘ and the customers’ internal PPE (Prescribed Parts Equivalent) lists
  • maintains part cost and risk details by part
  • makes global search by part and equivalent quick and easy

Part IQ contains a database of hundred of thousands of components from thousands of suppliers globally and provides real-time inventory availability monitoring from distributors and suppliers. It’s also capable of monitoring part availability and notifying the buyer as soon as a specific part becomes available anywhere in the network.

Deep detail is maintained on every single part and includes information such as manufacturer and part number, usage, prices, savings opportunities, and alternates. It also cross-references BoMs containing the part, known risks associated with the part, and Part Analytics.

This allows a design engineer to quickly gauge availability during R&D or build-to-order quoting, as well as sourcing professionals to quickly gauge immediate availability, lead times and expected pricing if they also have Category IQ (to be discussed later) as it can pull in trends and insights from the Category IQ module. If they integrate with their PLM, they can also see current inventory within the tool as well as pull in product forecasts to see if the available supply is likely to meet their demand.

It also helps R&D to ensure compliance with industry and market requirements as Part Analytics harmonizes all of the data and they can quickly tell not only if a product is compatible, but if it is compliant with certain regulations as detailed specifications with the required material composition will always be available in the drill down.

BOM IQ

Arguably the core of the suite, BOM IQ (or Bill of Materials IQ) stores all of the electronic / electro-mechanical bill of materials being sourced by the organization as well as associated forecasts/demands from the PLM solution (and can push updates on material availability, inventory, AVL, and approved PPEs into the ERP if desired).

At the BOM level, it provides an organization with insight into:

  • the overall health rating (based on compliance, material/product risk, product/part/line-item health)
  • the number of unique line items with lead time, lifecycle, single source, RoHS, or other supported compliance risk (if data feeds/subscriptions are available)
  • the current annual spend summary and projected spend summary
  • BOM cost trend over time
  • the total estimated savings available from based on alternates and negotiation

For every line item it also stores all of the relevant associated information including, but not limited to manufacturer, distributor, current costs, usages, risk/health rating, and information from past events. It’s very easy for a user to navigate around the BOM IQ product and see not only current prices and usage, but to drill into associated risks and compliance.

In a nutshell, the solution provides actionable data by leveraging technology to contextualize data from hundreds of sources including distributors and manufacturers.

Category IQ

Category IQ rolls up the line-item/part/component/material intelligence by category and allows an organization to get an overview of their spend, opportunity, and risk from various points of view such as commodity, supplier, business divisions and products. This allows the organization to get a comprehensive view of spend and savings potential from different viewpoints and make the best overall sourcing decisions for the organization.

More importantly, the organization can also see a roll-up of risks and non-compliance by category, which can be filtered to certain risk types to allow the organization to address the most critical risks first. Especially since it can roll up the number of units in a given life cycle state, being single sourced, etc. and drill in to parts coming from a specific region to allow an organization to quickly assess the potential impact of geographic/geopolitical events and disasters on the supply chain.

Once the buyer has a firm handle on her categories, she can proceed to sourcing in RFQ IQ.

RFQ IQ

With a strong understanding of her categories, a buyer can initiate sourcing projects using RFQ IQ. This module simplifies the sourcing process by allowing buyers to set up events with ease. Key elements include defining line-items or BOMs, approved vendors, questionnaires, and bid sheets with detailed cost breakdowns.

Upon receiving bids, buyers benefit from a comprehensive summary that highlights the total parts up for bid, the number of bids received, and potential new spend based on the lowest bids. This summary also offers insights into category spend by business unit.

The platform enables buyers to delve deeper into individual supplier bids, comparing spend differentials and assessing the impact of choosing specific bids. Buyers can utilize automated features to award the lowest bid by supplier on a part or BOM basis, or make manual adjustments to finalize awards. Notifications are then sent to suppliers, and the award details can be integrated into the ERP system to initiate the contracting and P2P process.

One of the standout benefits of RFQ IQ is the ability to automate much of the sourcing process. Once the master file is established, buyers can launch events by simply defining timelines. Automation can handle the process from initiation to award recommendation, significantly reducing manual effort. For example, one client saw a reduction in manual effort from 710 hours to just 10 hours, thanks to the module’s robust automation capabilities. While results may vary, most organizations experience efficiency gains of 30% to 60%, depending on their automation preferences. Additionally, the overall sourcing process time can be cut from months to mere weeks, providing substantial time savings.

Furthermore, since the demand can be defined by business unit, it allows their customers to maintain their decentralized structure (as the platform can support bids by business unit when each is in a different location and would dictate a different landed cost) while still supporting volume consolidation through a Centralized Center of Excellence (COE) for cost reduction and best practice sourcing. This also allows an organization to get a fully centralized view into their global supply base by category, BoM, and part; identify key areas of material/part/product-based risk that needs to be assessed; and harmonize costs and lead-times at the same time.

By giving buyers a global view, they can identify all FFF and F component alternatives, including those that are more readily available, higher in quality, and/or earlier in their life-cycle, allowing the organization to identify potential strategic OEMs and suppliers early. And for off-the-shelf, always having centralized insight into global supply across hundreds of distributors is extremely valuable when a disruption happens in your current supply chain.

Furthermore, the fact that Part Analytics is PLM (and not ERP) first means that buyers have a firm handle on not only what Manufacturing needs, but what R&D is working on and can ensure R&D is not designing for materials/parts that could be expensive or hard to get and/or maintain a stable supply of when there are more affordable, more available, or more reliable alternatives available.

Plus, if desired, part and BoM population can be done entirely from spreadsheets, allowing for an organization to get up and running quickly as a) most organizations without a system custom designed for electronics / electro-mechanical direct sourcing, even if they have a modern PLM (and/or ERP), maintain all their part and BOM info in spreadsheets. Not only does this allow Part Analytics to get an organization up and running quickly, but it also allows them to instill best practice as Part Analytics serves as the Parts Master and, once the PLM integration is completed, always keeps the BOM in synch, and the organization never has to worry if they are sending the sheet with the right version of the BOM (was that v.21 or v.23 we finally decided on) to a supplier for bidding.

Looking Ahead

Right now, it’s just cost trends over time for category intelligence, but by Q4 Part Analytics intends to release advanced commodity/sub-commodity insights around pricing trends, availability, and lead time using advanced analytic and forecasting algorithms and supply and demand signals in their Category IQ Module.

Also, as indicated above, future releases will support more data integrations for supplier (and not just material/component/part-level) risk analysis.

Summary

Part Analytics is a great solution to harmonize sourcing, inventory, and supply chain visibility in your electronics and electro-mechanical spend categories. Furthermore, it’s real-integration to hundreds of OEMs and distributors provide invaluable real-time insight into supply, demand, lead-time, and cost trends and benchmarks that can help organizations get a better handle on their overall sourcing efforts, especially if they primarily run as a decentralized operation across product lines / business units or geographies, especially since it can unite engineering and commodity sourcing teams on one coherent picture. It’s a great solution for part-based supply chain visibility, and for deeper insight into how to achieve this, you can download and checkout their handbook on supply chain visibility.

Airflip: Flip it to the “S” Side

Airflip is a new, and unique, offering in the Source-to-Pay+ space that offers what they call “analyze-to-intake” and what is actually a new generation of analytics-backed category intelligence that allows a sourcing team to not only identify categories of opportunity, but identify where that opportunity is and what vendors they should be looking at.

Introduction

Airflip was founded in 2022 to help small Procurement teams in mid-sized Procurement organizations be prepared for their next deal. Billing itself as “vendor intelligence for your next deal“, it provides something that most small Procurement teams desperately need, and don’t even know how much they are missing by not having it.

Before we can dive in, we have to step back and discuss where category management is today and where it’s lacking. Today, category management is typically addressed by services vendors who bring their expertise to help you define a category, understand the market dynamics, put together a sourcing strategy, identify the appropriate suppliers/vendors, put together an RFP, put together a should-cost model, identify the evaluation criteria, and the process for selecting a supplier.

The Category Management solutions out there today are good, but they have their limitations. First of all, it is limited to the categories the services vendor has expertise in. Secondly, it is limited to the categories the buying organization can afford to pay for. (Services are costly, and if it’s a complex category, and requires a month or two of an expert’s time, that’s more than an annual license for a niche best-of-breed module in Source-to-Pay+.) Thirdly, it’s not repeatable by the buying organization the next time the category comes due for sourcing.

A technology solution was needed.

There are a few of those out there, but most of these fall into the categories of:

Savings Estimators
(Hybrid Servies-Backed) Sourcing platforms that keep track of identified savings percentages by category (at level 2 or 3 of a vendor standard hierarchy) and/or changes in average market price over time to identify an expected savings range should an organization choose to source the category (at the current time)
Specialist Category Sourcing Platforms
which incorporate market intelligence on supply vs demand, price trends, economies of scale by supplier, and logistics/supply chain costs and guide the buyer through a fine-tuned workflow for the current optimal strategy

And, outside of select categories, don’t really help a buyer:

  • identify which categories have untapped opportunities
  • get insight into current spend and potential opportunity
    (based on spend on-vs-off contract, etc.)
  • identify which vendors they currently source from in those categories
  • identify which other vendors they could be sourcing from
  • get relevant category-based insight on those vendors
  • get insight into how to evaluate the category
  • get insight into how to identify the relevant organizational needs, and what should happen before the sourcing event is kicked off

As most of this insight is limited to research reports from category consultancies or expert services providers. What is needed is a combination of the two solutions.

Airflip is one of the first solution providers to create a platform that bridges the capabilities of today’s “savings estimators” and “category insights” platforms with detailed category insight and guidance tailored to the organization’s current spend and supply base.

It does this by combining analytics (for spend insight), select contract meta data (for on vs off-contract insight), category intelligence [research] (gathered from the web and curated 3rd party data sources), and pre-sourcing category guidance [deal management] into one unified platform.

Analytics

Airflip is powered by a modern spend analytics application which allows the cube to be sliced, diced, shaped, and reshaped to your liking. While it only supports one cube (for now), the dynamic spreadsheet-like interface still puts it on par with a top 10 analytics application as a user can easily map and remap transactions and categories, create customized views using filters on any dimension, and drill down into the individual transactions if necessary.

Like every good analytics application, it has a dashboard that displays standard spend breakdowns by department, category, supplier, and cost center. Standard filters are date, thresholds, category, PO, contract, requester/department, payment method, domain, etc.

The standard spreadsheet view is a split view with the category hierarchy on the left and the transactions on the right, displayed in standard row/column spreadsheet format where the rows can be resorted and the columns reordered and hidden. For easy manipulation, the user can bring up a configuration view on the right that allows the columns to be hidden and unhidden and rows to be grouped in any order, based on any arithmetic formula.

One of the more unique capabilities is their semantic spend classification that uses all of the transaction data, their augmented supplier / vendor profiles, and third party data feeds to classify a transaction to level 3, and even level 4, if there is sufficient data, or to a higher level if there isn’t, with high accuracy. (Unlike traditional neural nets which tended to max out at 80% or Gen-AI which tends to max out at 70% or worse.) For example, they can often classify an implementation down to a CPQ software implementation (level 4 under software implementation, under IT Consulting, under Professional Services) vs. web development vs. translation and localization vs. generic implementation services. It’s a level of classification not found in most providers.

Associated with each transaction is a generated vendor overview based on retrieved profile data from the vendor website and any available third party data feeds.

Contracts

As noted above, it’s not a contract management platform — all it can do is integrate with a contract store, suck in all the contracts, process them with semantic AI, extract defined clause types, extract products and services, extract costs and obligations, and use that data to augment transactions and help the user answer questions as to whether or not a contract contains a clause or term.

Right now, it’s a very simple repository where you can sort and filter contracts by supplier. Drilling into a contract brings up the meta-data and key details associated with the contract, and a link to the uploaded pdf.

Research

Their “research” centre provides the category intelligence by subcategory, for example sales/marketing software in back-office software in software. The market research category intelligence provides deep insight into:

  • business area (sales acceleration, workforce management, intelligence, quotes, and contracts)
  • description
  • market leaders
  • (sub) categories (engagement, email, dialer, demo management, etc.)
  • … and in each (sub-) category, with the right license level,
    • the business impact,
    • overview
    • market details
    • key features
    • the (sub-) category leaders and organizational suppliers,
    • the recommended sourcing strategy
    • category risks
    • the related categories,
    • the relevant evaluation criteria,
    • the internal worksheet (for eliciting the necessary information from internal stakeholders)
    • a (starting) vendor questionnaire (that can be extended by the customer)
    • relevant links
    • … and, for each vendor, with the right license level, a research report that specifies
      • what the vendor does
      • who the solution is for
      • why the vendor is different
      • the funding the vendor received
      • known integrations
      • recent product/service launches
      • acquisitions the vendor has made
      • other key facts on the vendor

In most indirect and services categories, it will be more than enough information to identify the right suppliers to invite to the RFX. For direct, where custom goods are required, it will at least allow a buyer to identify those suppliers who make similar products in the (sub) category and get the buyer close to a short-list.

Deal Management

Deal Management is the final part of the application and provides the pre-sourcing category guidance for the product or service being sourced based upon the built-in category research.

The deal management capability walks the category owner through the business owner requirements, the evaluation workflow steps, the necessary compliance considerations, an evaluation of the business impact, an overview of the alternatives (for comparative baselines and negotiation ammunition), the recommended negotiation strategy, an outline of key steps in the strategy (and progress tracking capability), and the estimated savings potential. It can be configured with all the standard steps to help a junior buyer work through a purchase on their own, or a senior buyer expedite a process while ensuring they don’t miss anything important.

In addition, during the research phase, the application contains survey capability for the buyer to solicit the inputs required from the category or business stakeholders in order to properly plan the sourcing event.

Summary

Airflip is a great solution for mid-market companies looking to get platform-based insight and assistance into their category management. While the depth of insight will vary by category and vendor (as it’s relatively new and development is ongoing on a daily basis), it’s considerably more than the average small Procurement team in a mid-size organization will have access to, and a great foundation for success where the team doesn’t have deep category knowledge or insight across the board. So if you want better sourcing strategy support, consider flipping it to the Success side and inviting Airflip to your category management RFP.