The rising art of Category Management can merge complex supplier networks into one that’s easier to navigate. The online resource for procurement and supply chain professionals, The Strategic Sourcerer, sets out how procurement teams can implement this increasingly vital strategic management of spend categories in their organisations.
Category Management (CM), which is specific to each different company, separates products that the firm produces into individual categories, then treats each product category as its own business unit for strategic sourcing.
Implementing CM begins with training — ensuring that employees have a clear understanding of what CM is and the methods for which the company will use it. Online CM training options are available.
Step two is initiation: every internal party to be involved in CM should be informed about its launch and given a clear idea of how their efforts will serve its goals. Setting up communication channels with cross-functional teams is a core component of this step.
Step three is spend analytics to ensure that you have a clear overview of the financial impact of each spend category. Bringing in a specialist data analyst from a third-party procurement consultancy can be helpful here if you use several ERPs and need to normalise the data before starting CM.
Fourth, design your company-unique category management system. This involves deciding how best to split up product categories, and identifying which are of most immediate importance. Your category managers can be organised by unit level, centralised into a CM team, or you can outsource the category management process to a good procurement consultancy.
Next comes implementation, which means keeping watch on how the fledgeling CM processes are working and tweaking or course-correcting those that aren’t.
Finally, keep evaluating how the CM initiative is progressing, especially whether it’s achieving the expected cost reductions. If not, the categorisation method may need altering.