Question
Task
You are required to select an example of a category of procurement or a product, service or works bought by
your organisation and create a category plan. This should include an implementation plan which also
identifies the challenges in implementing your plan and your strategies for mitigating the challenges.
Solution
Executive Summary
Category planning is an undertaking where category plans are developed in alignment with the customer’s business objectives with a strategic approach for maximising value, reducing risks, and effectively managing the supply of goods and/or services. Hence, this report has created a category plan of the Woolworths group with the selected procurement category being cleaning products. The data used in informing the findings of this assessment were sourced internally from the organisation with different tools: Kraljic matrix, market structure, PORTER’s 5 and SWOT analysis. The best practice of implementation of category plan has been established through these tools to maximise value, risks reduction, and supplier chain management. From the analysis of competitiveness and cost of ownership, different challenges encountered in implementing the category plan have been identified. The challenges have been linked with a lack of rational decision making based on facts and data, failure to transition beyond the traditional procurement competencies, and a standardised category plan process for the overall Woolworths Group categories of spend. Relevant approaches for mitigating the identified challenges have been identified.
Based on the findings’ analysis, relevant recommendations have been suggested for improving the category plan for Woolworths group limited cleaning services category of spend. These recommendations are;
- To establish a strategic supplier relationship management by transitioning from the traditional procurement competencies
- To develop efficient sourcing approaches in the different categories of procurement instead of adopting the standardised category plan process
- To consistently update their category plan based on arising needs of the organisation spend categories
- Ensuring any category plan decision in the organisation is made based on facts and available data
- To provide the procurement department with capacity development and training opportunities to improve their capacity of modernised category plan
Table of Contents
1.1 Organisation Background. 3
1.2 Selected Category of Spend. 3
2.1 Kraljic Portfolio Matrix. 4
2.1.1 Positioning of Suppliers. 5
2.1.2 View of Suppliers on Customer Account 6
2.1.3 Supplier Preferencing. 6
2.3 Total Cost of Ownership Analysis. 9
2.4.1 Porter’s 5 Forces Analysis. 11
3.0 Implementation of the Category Plan, Challenges Incurred and Solutions. 13
3.1 Customer-centric Arrangement of an Organisation. 13
3.2 Establishing a Functional Suppliers Trust 14
3.3 Evaluating and Monitoring Category Plan Success. 14
3.4 Categories Definition, Improvement and Enhancement 15
4.0 Conclusion and Recommendations. 15
Appendix 1: Woolworths Product segmentation. 19
1.0 Introduction
1.1 Organisation Background
Woolworths Group Limited (WGL) has been operational since 1924 and is currently ranked as the leading retailer in Australia operating approximately 3,000 stores and counting (Woolworths Group, 2020). The organisation brands include food, drinks, petrol, general merchandise, and restaurants. The organisation has currently employed 201,000 team members serving over 29 million customers across their different brands weekly. This is achieved by their partnership with multiple local farmers and manufacturers. Apart from the organisation partnership with other organisations, including Woolworth, Countdown, Dan Murphy, BWS, and Big W, they also endeavor to establish strong and long-term partnerships with their suppliers through fair and equitable dealing.
Regarding WGL procurement function, they collaboratively work with suppliers through a transparent system for managing the buying process with their partners (Partner Hub, 2020). Products to be supplied are grouped into broad categories, which are later broken down into subcategories. This is achieved through a rigorous category plan, which entails a review of all products added or removed from a category.
1.2 Selected Category of Spend
The category selected is cleaning products. These cleaning products are used in all the organisation 3,000 stores in Australia. As a retailer, maintaining high standards of cleanliness is a critical factor. As a result, WGL has been offered the ISO 14001:2015 for maintaining high-level cleanliness and quality of their services delivery (Woolworths Group, 2020a). The cleaning products category is grouped into subcategories of scrubbing, mopping and polishing, cleaning, toilets for public and staff, lunchrooms, store-rooms, staff offices, and car parks. Due to the WGL operations’ criticality, an appropriate category plan is essential to ensure that they do not procure wrong cleaning services, exposing them to surmountable risks. In the past, the organisation has been fined due to operating contrary to Australian employment law, which is majorly associated with a lack of appropriate sourcing of the cleaning products and services, leading to its exposure to hazardous chemicals (ABC News, 2018). The organisation trend was engaging subcontractors, and labour hired business models. Hence, developing this category plan will appropriately guide the organisation in resolving potential conflicts with Australian government authorities and altering business practices. All WGL stores operate through a strategic practice of ensuring they do not jeopardize health and safety issues and the need for the identified category of spend.
2.0 Category Plan
According to CIPS (2013), category planning is applicable in developing category plans aligned with the customer’s business objectives with a strategic approach of maximising value and reducing risks, and effectively managing the supply of goods and services. To develop a category plan, the different steps followed is as shown in figure 1;
Figure 1: Category Planning Phases
2.1 Kraljic Portfolio Matrix
In line with the identified steps of category plan, to identify the appropriate approach for WGL, the Kraljic portfolio Matrix can be used. This is a tool for portfolio analysis used in determining procurement objectives, value addition, contract strategy, relationships with suppliers, and tools/techniques applicable. According to Narsimhan and Prasad (2016), supply chain vulnerability is substantially reduced with the buying power maximised by identifying these aspects.
Figure 2: Kraljic Analysis
As shown in figure 2, the category of spend (cleaning materials) is categorised in the leverage items. In Australia, there are multiple suppliers of cleaning materials. Despite their criticality in the performance of WGL operations in its business environment, this category enjoys a substantially lower supply risk. WGL leverages from immense possibilities and incentives to negotiate as small percentages of cost savings result in enormous money (Caniels & Gelderman, 2005). The best practice for WGL in the category plan would be to establish a strategic partnership with the suppliers as opposed to its current independent strategy of procurement.
2.1.1 Positioning of Suppliers
As evidenced in the Kraljic analysis, cleaning materials positioning in the leverage items quadrant, their supplier positioning can be identified as a low supply chain but high importance in assisting the organisation in earning profits. Additionally, cleaning materials are characterised by a high expenditure, multiple alternatives in existence, and immense qualified supply sources. Therefore, category plan must ensure that they enhance customer’s purchasing power for standardising and generating appropriate purchase retirements. A summary of the suppliers, costs, and subcategories of cleaning materials in WGL is as shown in table 1;
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