Why category management and strategic sourcing should be seamless

CPOs need to develop effective category management functions to improve efficiency, an industry expert has…...

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CPOs need to develop effective category management functions to improve efficiency, an industry expert has recently asserted. Veteran management consultant, Scott Stewart urged that this should be done by ensuring that efforts to transition contract relationships made by external strategic sourcing teams aren’t lost or diminished during the handover to category managers.

Effective strategic sourcing teams regularly produce large volumes of contracts which deliver on company cost reduction and supplier-led innovation. However, Stewart observes that, too often, many of these efforts remain unseen and undervalued by category management teams.

The hard-won gains and concessions secured by strategic sourcing teams must be seamlessly communicated to and understood by category managers, Stewart argues. This is so that they can be nurtured and supported through continued supply relationship management efforts. These gains can so easily fall through any gaps which may exist between strategic sourcing and category management teams – so both departments must strive to minimise these.

For Stewart, effective category management should include strategic sourcing but is far broader in scope. Amongst other things, it helps to improve stakeholder relations, lowers the level of risk in the supply chain, identifies new sources of value and innovations among suppliers, and helps to deliver significant cost reduction, frequently in the region of 10%-30%.

He recommends that CPOs ensure there are genuinely seamless transition processes in place, from strategic sourcing outcomes to business-as-usual category management functions. But CPOs need to do more than this, by cultivating detailed accounts of the organisation’s business strategies so that categories are in line with commercial goals, or by using big data and cutting-edge spend analytics to measure performance against clear category benchmarks. The latter should be specifically designed to facilitate further improvement opportunities.

In addition to this, Stewart believes that collecting rigorous supplier performance data is an absolute necessity if improvements in quality and service are to be identified, while continually analysing pricing on local and international markets. Finally, stakeholders should be kept in the loop via frequent discussions and reviews so that they’re involved in essential category decisions.

As Stewart puts it, it’s time to go beyond strategic sourcing to expand.

Ed Cross

Ed founded Odesma in 2014 with the explicit intent of creating a new kind of procurement consultancy founded entirely on cloud principles. Deploying best-of-breed subject matter experts alongside the best on demand technology to deliver rapid and effective change for customers.

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