5 Simple Truths About Category Management
Category Management may not be known as simple, but it doesn’t need to be scary either. Whether you’re a Procurement leader who has implemented Category Management or are thinking about it, here are 5 simple truths about Category Management:
Category Management is the most evolved Procurement strategy of the 3 common approaches
(tactical, strategic sourcing, and category management)
- The simplest form of procurement is at the tactical purchasing stage – executing orders (3 bids and a buy)
- Higher levels of strategy are employed at the Strategic Sourcing stage to capture more supplier value and to consolidate the supply base
- Category Management uses in-depth market insight to drive value to entire categories and evolves in real-time as the market changes
Category Management is not a one-time implementation and then you’re finished. It’s a continuous evolution.
Category Management is about continuous improvement of life cycle costing. It’s a dynamic approach that requires proactive management and an evolution towards peak effectiveness, which is a moving target that changes with market dynamics.
A deep understanding of the market place is required
A key component of Category Management is deep knowledge of the marketplace. The Category Lead should develop a deep understanding of their categories and stay up-to-date on the latest developments so that the procurement approach can be optimized to the market’s offerings.
Category Management does not require hiring or implementing a Category Manager from the start
Category Management evolves through an iterative process of categorization, category ownership, and eventually instituting formal roles. A Category Point of Contact can be assigned to start to manage a category as the transition to Category Management occurs.
Procurement’s primary role in Category Management is to guide the buyer (Business Unit) using a series of targeted questions
By addressing the key questions about Demand and Forecast, Financial, Operational Requirements, and Quality, you’ll have fulfilled your responsibility as the procurement advisor, having:
- Examined the historical purchasing patterns
- Addressed the key financial strategies
- Aligned with stakeholders on the distinct features and requirements necessary
- Set expectations for what quality looks like and how it should be delivered
If well-executed, Category Management will produce far greater results for your procurement department and the organization than more elementary procurement approaches. A well-implemented Category Management structure will facilitate stakeholder alignment through the benefits of deep market knowledge. It will also enhance long-term vision and strategic planning through historic data tracking, bring visibility to progress through benchmarking, and motivate the workforce by developing expert knowledge in dynamic categories.
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