Category management has decade long history that has lead us to our modern understanding of procurement strategies. Category management helps retailers to increase sales by minimizing unproductive competition between their own products.
Today, the term has evolved to identifying a process for improving efficiency in supply chains, but at its core it is still about grouping items to maximize value. Category management is a strategic approach that organizes procurement resources to focus on specific areas of spends. Category managers can zone in on one specific category and conduct market or pricing analysis for that particular group.
The Category Management Process
To start, a category manager typically works with members of different procurement teams to develop a category plan that includes the products and services in their specific category.
The model for category management might look like this:
- Category Analysis: This first stage includes defining your category, examining current spend trends and business goals, forecasting demand, and considering stakeholder analysis.
- Market & portfolio Analysis: In the second stage, you may dig deeper into data across your entire market. This includes looking at macro analysis, trend analysis, a procurement market analysis, cost structure analysis, category positioning, and a SWOT analysis.
- Category Strategy & Levers: The third step in the category management process includes evaluating current levers, selecting and prioritizing levers, and creating a to-be supplier portfolio for tracking and comparing potential suppliers.
- Validation of Strategies: This stage includes evaluating potential suppliers, defining your key performance indicators that you’ll use to manage supplier success, and evaluating the risks in your category’s supply chain.
- Planning Implementation: Implementation planning typically includes planning procurement activities, defining your category team, evaluating capacity and the amount of required time for your activities, and documenting your strategy.
- Tracking & Implementation: Finally, you’ll want to establish and monitor views of your sourcing activity progress against your success measures and your savings initiatives.
So finally, the key success of a Category Management Solution is:
- Automating visibility of categorized info & spend
- Allowing the integration of external systems
- Providing alternatives for customers that do not have integrations
- Providing center place for managing strategy & planning decisions.
- Providing clear oversight of activity initiated as a result of category strategy
- Automating aspects of the overall process as much as possible