What is Category Management in procurement?

Category management is a strategic approach to procurement. As Delta’s first blog ‘A Guide to Category Management’ outlines, the concept of category management derived from marketing in supermarkets, where careful analysis of top-selling products and demand was streamlined across stores to make organisations spend as effective and efficient as possible.

The same principle of category management can be applied to public sector procurement. Emphasis can be placed on organising the resources and priorities of an organisation to make informed decisions on where spend should be allocated, supported by data. By doing this, managers can focus their time and conduct in-depth market analysis to fully understand their procurement decisions.

There are numerous benefits to procurement buyers implementing category management. This guide offers an illuminating overview of category management in relation to procurement. It will cover how category management can be applied to the procurement process and the key advantages of establishing it in your organisation. By the end of it, you will be able to answer ‘what is category management in procurement?’ and be ready to make positive changes to your procurement process.

The application of category management

1. Initiate and prepare

Category management can be a complex process, if it is not fully planned out. Therefore, before your organisation makes drastic changes or presents to the wider business, senior management need to have a clear knowledge of the stages of category management, from the start to the end. What data do you need to access to improve your procurement decisions? What key figures and departments should be involved and when? How can the process impact on the supply chain and other stakeholders? Set aside an appropriate length of time to dissect these areas, before anything else.

2. Identify priorities

For category management to achieve your goals, your organisation itself must first be clear on what your goals are, in both the short and long term. In addition, your organisation may have several priorities that need to be addressed in order to reach these goals, as well as key milestones you need to reach along the way. Identifying and acknowledging this process is crucial for all parties involved in the procurement process. For example, your priorities will be different from the priorities of your suppliers, so the conversation needs to be had to cover all possible scenarios.

3. Prepare and present strategy

Once your organisation has a thorough understanding of the entire category management process, it is time to plan how it can be implemented, taking into consideration realistic timeframes, resources and measurable indicators. First categorise your organisation to focus on specific areas of spend. Analyse data and conduct market research to ensure you are doing this effectively, then set category managers to oversee the progress of particular areas – spend, demand, supplier engagement, areas that need improvement. Set management techniques and prepare appropriate responses for each category.

4. Implement changes

Once your strategy is complete, set a date and introduce the concept across the business. All appropriate staff need to have been trained on the strategy before this and be aware of how their category will be managed. The procurement team, in particular, need to have a strong understanding of all aspects of the category management process and the importance of analysing data and identifying problems when they arise.

5. Maintain the changes

Test your category management system for a set period of time. This is to ensure the effectiveness of the system in your organisation can be fully compared to previous practices and results can be analysed. This is an important stage of the process, as it allows procurement managers to analyse the success of the initial implementation of category management in order to improve it further going forward.

6. Improve and enhance your organisation

This step can be seen as the result of streamlined category management, yet it is also an actionable step. The objective of category management is to approach procurement, in a way that is strategic, categorised, and more easily manageable. Therefore, the improvements that are identified as necessary during the category management process must be implemented to make category management worth the work that is involved. It is worth mentioning that category management alone can save organisations typically 10-30% of their annual spend.

The advantages of category management

Gain greater use of resources

By strategically evaluating an organisation and dividing it into categories based on function, category management gains maximum productivity from a limited resource and drives organisations further through effective change. Therefore, any business benefits enormously from adopting category management as one of its best practices in procurement. It has the capacity to not only add value in reducing supply chain risk, but also drive innovation and change across different supply chain categories.

The constant conversation in public sector procurement is balancing the quality of goods, works or services with a procurement process that is efficient – this encompasses cost-effective, sustainable and environmentally friendly procurement methods. Category management achieves the best for the majority of these purposes, by identifying areas which can be improved and streamlining the entire procurement process from beginning to end.

Other key benefits of category management are:

  • Breakthrough savings
  • Improvements in service levels, quality, availability and value for money
  • Addresses and reduces risk in the supply chain
  • Delivers world class procurement solutions
  • Enables supplier capability development

Delta eSourcing champions the category management process. By segmenting your procurement process with tools including Tender Management, Supplier Management and Workspace Manager, all within an accessible web-based service, Delta’s eProcurement methods help organisations strive to effective and efficient procurement.

Experience how Delta can bring out the best in your procurement.

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