Category Management is a systematic approach to procurement in which companies divide their spending into categories with similar or related products, allowing for aggregation and efficiency. Organizations frequently spend money on the following categories of category strategy procurement:
Did you know?
More than three-quarters of company managers (76%) believe category procurement services are more or much more significant today than it was five years ago.
Category Management is a systematic approach to procurement in which companies divide their spending into categories with similar or related products, allowing for aggregation and efficiency.
Fun Fact: “In category management, effective dialogue and honest negotiations are essential for achieving the best balance among clients and vendors.”- Shannon Wegner.
1. Category management for purchasing could be about segmenting items, stocks, or services based on their value, vendor, kind, or volume.
2. Pareto (80/20 rule) & ABC Analysis are two related theories of category management for purchasing which can be utilized to help deconstruct products or services.
3. Category strategy procurement is feasible to see where large levels of expense are accumulating and where the attention should be directed using these models.
| High | Medium | Low |
| Size of spend | Indirect/Direct spend | Timeliness of need |
| Business criticality | Risk exposure | Current approach |
| Savings potential | Commonality of category | Government regulations |
| Category complexity | Supply base market dynamics | Supply base local availability |
Category Management in purchasing is an important component since it directs the team’s strategy for building and developing supplier relationships in order to enable for deeper discussions and program development.” In category management for purchasing, we also wanted to hear what Shannon thought was the most efficient balance among clients and vendors. ‘’ In category management for purchasing, a most effective balance among clients and vendors is dependent on effective discussion and fair discussions. The one and only thing a provider can say is ‘no,’ I always say. I’m always willing to ask for more, but I’m also willing to face backlash if my request isn’t met with a resounding affirmative reaction.
There are a variety of approaches to developing a category strategy procurement, so here are key issues and considerations.
1. Definition: What should the various categories and subcategories be called?
2. Spending analysis: How much money does every category and its subcategories get?
3. Market analysis: How can the supply market for each category management appear, and does it meet the needs of the customers?
4. Improvement: The market intelligence gleaned from the market research is put to use. This may lead to changes in specifications, as well as a change in the scope of the work or the need to identify new suppliers and vendors.
5. Continuous application: This knowledge is employed on a continuous basis in category strategy procurement practices and transactional purchasing.
Effective category management includes, but is not limited to, the following areas:
1. Relationship management with suppliers
2. Evaluation and appraisal of suppliers
3. Communication that incorporates soft skills is effective.
4. External influences, market analysis, and competitive forces
5. Identification and management of stakeholders
6. Sustainable/ethical procurement
7. Management and leadership of a group
Technology is able to help with Category Management via improving MRP and ERP systems, as well as barcoding, RFID, and automation advancements. Category Management is an outstanding method for increasing productivity, reduce spend, and add value to the supply chain function when blended with SRM, use of soft skills as well as EI, the development of new tech, evaluating the market, coordinating and assessing stakeholders, ensuring ethical behavior, and actively pushing towards sustainable procurement.
In our experience, category management that is well-executed outperforms tactical or short-term tactics. Improved stakeholder needs to be aligned through deep market understanding, long-term vision as well as strategic planning through ancient data gathering, greater visibility to advance through benchmark tests, and ability to motivate the workforce through developing expertise in vibrant categories are all outcomes of very well category management.
