Guide to Understanding the Category Management

Are you looking for a guide to implement category management within an organization’s goods or services sector? If yes, you are on the right page. We will discuss every detail about category management in this blog.

What is category management?

It is a type of management strategy where the business makes a change to increase the efficiency and consolidation of their procurement. It works strategically, and a business creates a category by segmenting its expenditure into similar or related products. 

It is like making a list of items with the same type of expenditure and spending trend and vice versa. Here, you split direct and indirect products or services based on their value, type, or volume. 

You may apply the associated theory in making the list. You get a summarized view of the strengths, weaknesses, opportunities, threat areas in your procurement process after making the categorization.

Benefits of category management

It enables you to focus on the core areas, and you also get the flexibility to use the data to negotiate better with suppliers. You align your corporate objectives with suppliers, so it becomes beneficial for both.

Category management also helps in organizing the procurement resources. You exactly know the details about every money spent that helps in contributing faster economic growth and also enhances supplier/buyer relationship. As a business, you get an in-depth understanding of the risk of different categories and may make changes for future advancement.

Category management process

  1. Process Initiation:- You will require using the direct and indirect model in the initiation of the category management process. Here, you need to set up defining the categories. One size does not fit all, here you need to choose your category based on your requirement, business size, future aspects, and other factors.
  2. Preparation:- You need to set the vision so that buyer, supplier, category manager can get a good idea about your end goal of choosing the process. Once you have the vision, the preparation process becomes easy.
  1. Assigning priority:- You cannot achieve all of what is expected in one or two years. You need to have a short-term and long-term goal, that is why prioritization is important. It helps in making the results measuring process very simple to understand.
  1. Define: Procurement is a very long process, and it helps with lots of written and unwritten issues. Once you define it, you get complete flexibility to work within that frame. 

Let’s say, you have defined that you only need to contact suppliers within the 50 miles radius, it becomes easy for you to summarily reject the applications of suppliers beyond that limit.

  1. Implementation: Get your strategies approved by the senior management and implement it. Assign a category manager to deal with the entire stakeholder and their person will assure the effectiveness of the process.
  1. Maintain and Improvement:- Set the key performance indicator (KPI) or Service Level Agreement (SLA) to evaluate the performance. Ensure that you have a fortnightly or monthly online or offline meeting with different stakeholders to understand any improvement area.  

Also, set up feedback mechanisms so that important suggestions could be implemented to make the process smart and fine.

Final Word

Successful category management includes effective communication, team leadership, Sustainable procurement process, market analysis, competitive force evaluation, soft skills, supplier evaluation, and others.  Use these ways and make your procurement process effective.