The largest single danger for procurement is to be trapped as a deliverer of value by price only – being a prisoner of that approach rarely leads to an escape to a more strategic role, or to better value delivery.
The 6th driver for business performance (taken from our Global Category Management Leadership Report) is the maximised use of value levers. This has been shown to be a significant contributor to overall performance of category management and is a simple area to check for within any coaching or governance exercise. It is possible to argue that this is the simplest area to review and test, as it requires a comparison between all the areas that could be used with the areas that are actually being used in a category.
The power of the value levers model
The value levers model is intended to get category teams to explore, as far as possible, all of the different value streams available within a category and to ensure that as many as possible are included within the structure of a category strategy. At it’s most simple, the model appears to be a list of areas which can be checked off. However, the power of the approach comes when we are able to look for possible ways of using the many levers available and can test both how well we are using levers at present and what we would need to do to use them in the future.
The levers are often used at or around the options generation stage of the category management process. However, regular use through the process often creates an environment in which the necessary research and background is developed before reaching the options generation stage, which can make that activity far more valuable. It can be frustrating to reach that step and discover a host of interesting sounding opportunities but not have sufficient information to be able to include them in the overall strategy. This either slows down the strategy development phase or means that opportunities are missed in the overall strategy.
Understanding the detail
Effective use of value levers requires a good degree of familiarity with the content of the levers. This allows a category manager to plan for their inclusion all through the project and for managers to ask penetrating questions within the governance and overview approach. Although many of the value levers at a detail level are self-explanatory, there are enough that require a moment of thought to make sure the application of them is both appropriate and thorough.
As an example, Demand Management is a high-level value lever. Within that is a series of subsidiary value levers, such as ‘manage demand timing to exploit supplier economics’. This requires both a level of understanding of what sort of economics might be in play within a supplier, or within a supply chain, together with a good understanding of the timing issues that play around both our own demand and the supply chain’s ability to impact that. It is far too easy to ignore both the depth of evaluation necessary to exploit this fully, and the opportunity which may present itself through changes in buying pattern. This is illustrated in the world of car purchase, when buying a car at the end of a month or a sales quarter is far more likely to release value when sales teams are trying to make quota. Here, we’d need to understand the timings for that particular manufacturer, the value opportunities available, and the opportunity cost to ourselves of delaying or bringing forward a purchase.
And this is just one of 80+ sub-value levers available. We should not underestimate the challenge of understanding enough in this area to maximize affect. However, we should also recognize the breadth of opportunity which is wasted if we don’t do that.
To talk to us about a value lever workshop, call me directly on 07771 911783.
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