a primer on building and executing category strategy -...
TRANSCRIPT
A Primer on Building and
Executing Category Strategy
McDonald’s
Dennis TimpanaroSourcing Director
Mike SatlakProcurement Manager
www.sig.org/eval
October 2015
Fall SIG Summit 2015
A Primer on Building and
Executing Category Strategy
Category Management & Strategy
Setting the Stage
Building your Strategy
Fame and Flops
McDonald’s Facts & Figures
3
“I didn’t invent the
hamburger. I just took it more
seriously than everyone else.
We [McDonald’s] take the
hamburger business more
seriously than anyone else.”
~ Ray Kroc
Global Sourcing & Procurement
5
With all the critical procurement work to do at McDonald’s, why
would you devote time to making a category strategy?!
Category Strategy Benefits
6
Category Strategy Benefits
Being more strategic increases our ability to deliver value and has
earned procurement a role on the biggest company initiatives
7
We define Category Management as a set of all-inclusive activities that are strategic in nature, cyclical in process, interdependent among a variety of external factors, and have a clear focus on performance and results.
Benefits
• Integration of Supply Management, Sourcing, Engineering, Innovation, Marketing, IT, Finance, Global Strategies and Initiatives
• Right people engaged at the right times for any new developments or changes to current state
• Ability to drive design improvement or cost reduction activities faster and more effectively – by having the right people engaged at the right times
• Consolidate Efforts and combine redundant activities between functions
• Standardization of Processes and Tools
1Strategy
Integrated Base of Knowledge
Message to Supply Base
Set of Goals and Targets
CM Enables:
Category ManagementThe home of category strategy
8
Category StrategyTable of Contents
Category Management Process
Spend AnalysisCategory
SegmentationCategory Strategy
Supplier Relationship Management
Supplier Tiering
Governance and Reporting
Continuous Improvement
Category Overview
Current State• Spend Profile
• Stratification of Subcategories• Baseline Spend
• Incumbent Supply Base• Category History• Risk Assessment
• Global Alignment
Market Analysis• Industry Trends
• Environmental & Sustainability• Competitive Benchmarking
Strategy Development• Business Objectives• Overview of Opportunities• Category Strategy• Supply Base Strategic Vision• Strategic Lever Deep Dive
Execution Plan• Execution Plan Overview
• Initiative 1• Initiative 2…
Executive Summary
How can you gather this type of information?9
Tier 1 Categories (Strategic)• Critical to category operations and to
achieving long-term goals
• Supplier Partners
• Full Strategies
Setting the Stage
Tier 2 Categories
(Significant/Foundational)• Important to category operations
• Medium Spends
• Lean Strategies
Innovation
Menu Innovation
OperationsMarketing
Engineering
Supplier Mgmt.
Sourcing
Category Strategy
IT Global Markets
10
Building Your StrategyMarket Analysis
11
Building Your StrategyStrategy Development
12
Building Your StrategyExecutive Summary
Current Spend: $33,643,234 Key Category & Supplier Statistics
Supplier Profile
Over 20 general contractors serve the system. 4 are approved
Top three suppliers make up 46% of spend.
Replacement cycle is tremendously long so parts are an important input to overall cost of ownership.
Key Strategy Initiatives Expected Results TimelineSupply Base Management Consolidate supply base (Master Bilt) in for Walk-In Box suppliers wile mitigating risk to Walk in
refrigeration.
Begin to manage reach in refrigerators with by evaluating and support top 2 suppliers.
Start: Q4 2013
Complete: Q3 2014
Technology/Materials Breakthroughs Test environmentally friendly CO2 refrigerant
Work with suppliers to develop and launch new higher R value insulation to reduce energy usage.
Develop interior system to human proof keeping food 1” away from walls
Start: Q1 2014
Complete: Q4 2014
Service and Parts Improve scroll compressor parts pricing with conversion of 1st built product
Launch LED conversion kits
Start: Q3 2014
Complete: Q4 2016
Key Market Dynamics and Trends
Sustainability
Continued push to use less energy
Net Zero Energy
Federal Regulation:
Safety – Door locks
Refrigerant – Move to environmentally friendly
Design
New designs to maximize storage and layout
Business Goals and Objectives
Products
Walk-in Box
• Launch LED lighting options and drive conversion
• Evaluate new insulation for possible greater R values
Walk-in Refrigeration
• Test new CO2 refrigerant at one store
• Convert to scroll compressors
Reach In
Work with suppliers to make sure product ready
Supply Base
Walk-in Box
• Eliminate Master Bilt
Reach In
• Create preferred and secondary supplier tier structure
Kolpak, 7%
Norlake, 44%
Master Bilt, 18%
Kason, 4%
Bohn/Heatcraft, 12%
True Refrigerati
on, 8%
Traulsen, 7%
13
Sometimes, it doesn’t work
14
Where have you struggled?
Flops
15
a) Getting started
b) Finding a structure
c) Researching
d) Achieving buy-in
Lack of Understanding
Legacy Thinking
Participation / Ownership
Stakeholder Agreement
“Not Invented Here”
Training Your Team
Common Challenges
16
When it WorksSeating & Décor
17
• Company and departmental goals
united with procurement
• Led to significant value initiatives:
• 1,000’s of SKUs consolidated
• Custom items down: 70% to 20%
• 6-60% savings thru negotiating
and value engineering
Why did it work?
Up-front agreement, collaboration,
‘living’ document
Seating & Décor
When it WorksEnterprise Software
18
• Created a mini-governance process to
develop and execute strategy
• First true global view of category
• Valuable outcomes:
• Created new purchasing model
• Simplified annual ordering process
• Negotiated extended support to
mitigate security risks and save
Why did it work?
Collaboration, thinking creatively to
change trends, strong data/info
Enterprise
Software
RecapWhere to begin?
Want to try ONE thing to get started?
Pick a category and write out the key
stakeholders you’ll need to engage
19
Evaluation How-to:
Your feedback drives
SIG Event content
By signing and
submitting your
evaluation, you are
automatically entered
into a prize drawing
Why?
Option 1: App
1. Select Schedule2. Select Schedule by Day3. Select Day4. Select Session5. Scroll to Description 6. Click on the Evaluation link
Option 2: Browser
1. Go to www.sig.org/eval2. Select Session (#49)
How?
COMPLETE &SUBMIT EVAL
Download the App: bit.ly/SIGCAappTweet: #SIGfall15
Session #49
A Primer on Building and Executing Category Strategy
www.sig.org/eval
Dennis Timpanaro
McDonald’s
Sourcing Director
Mike Satlak
McDonald’s
Sourcing Manager
