Activity 12
Day one analysis

Figure 2.11 Day one analysis

Overview

Initially devised as a marketing tool to support brand campaigns in the 1980s, day one analysis was soon picked up by the procurement community and adapted to support the category management process. There are many iterations of this 2 x 2 matrix, the most popular being QPA Consultants’ version from the 1990s.

The theoretical concept is that preliminary analysis related to product/market positioning can capture a ‘day one snapshot’ of the supply and demand variables that need to be considered. This in turn may prompt further thinking around potential programme issues that could arise during the category management process.

Elements

The day one analysis tool maps categories in relation to the ‘number of suppliers’ (in the supply market) on the y axis and ‘number of customers’ (of the product/service) on the x axis. It is designed in this way so that a ‘rough plot’ of a category can be made in order to assess quickly possible project difficulties, such as little negotiation leverage due to lack of suppliers but high customer demand.

Each quadrant represents a type of procurement together with its corresponding characteristics:

• Tailored – This relates to products that are made uniquely for an organisation or a specific sector. There are likely to be many suppliers in the market capable of producing the offering; however, they will need to work collaboratively with the buyer to develop the specialist requirement. The emphasis of this type of buyer-supplier relationship revolves around joint understanding, supplier expertise and the development process.
• Generic – This refers to a fairly commonly specified, standard ‘off-the-shelf’ product, for which there are many customers and suppliers. There is likely to be little market difficulty in obtaining the requirements and little need to cultivate a buyer-supplier relationship.
• Custom – This relates to products made specifically by one supplier for one buyer. A high degree of trust, openness and honesty is needed to make this buyer-supplier relationship work effectively. The uniqueness of the product could bring capacity, capability and legal issues, such as intellectual property rights (IPR) retention, with it.
• Proprietary – This refers to a supplier that has achieved and protected unique features in what they supply, but within a market that possesses many buyers. The buyer will need to become a ‘buyer of choice’ and develop a relationship whereby the supplier perceives that the arrangement will yield significant benefit over and above others that may be available.

So what?

As a method for mapping categories against supply and demand parameters, it helps category managers identify where maximum value may be gained at a very early stage in the category management process. For example, products that sit within the generic quadrant, where there are many buyers and sellers, are likely to be easier to source and negotiate compared to those that sit in the proprietary quadrant, where the supplier dominates the market with a specific product characteristic and therefore may dictate price to its many suppliers – a monopoly situation.

Undertaking a quick ‘snapshot’ enables hypothetical links to be established more quickly, which may reduce the overall category management process time devoted to preparation and planning.

Category management application

• Establishes an initial ‘snapshot’ of potential supply issues
• Can be used to develop early thinking around problems that could arise in the category management process
• Is a mechanism for identifying categories in relation to supply and demand variables
• Links to the Kraljic matrix (see Activity 19) and corresponding analysis

Limitations

Since its inception in the 1990s, day one analysis has become less popular over recent decades. Critics argue that it is superficial and insubstantial and therefore not worth the effort of completing, especially when the Kraljic matrix, a tool which is altogether better known and understood as part of the category management process, can be used instead at a later stage.

Some of the well-known players in the field of category management consultancy have dropped the technique from their defined methodologies, focusing more on frameworks that deliver distinct quantifiable output, although there are a few that maintain that day one analysis is integral to the preparation process.

As the majority of category management processes can include over 40 different models, tools and templates, accepted practice amongst practitioners tends to be ‘sized to suit’. Therefore, relatively simple category projects are likely to drop the day one analysis, while more complex ones are more likely to preserve the matrix.

Template

The following template can be used to support category strategy development:

• Template 12: Day one analysis