The Essential Elements for Category Management Success

Practitioners of procurement are aware of the far-flung and immense value that a category management program can deliver. That said, implementing true category management is a difficult proposition. The broader, much far-reaching scope of category management as opposed to strategic sourcing makes it imperative for enterprises to have the right foundational elements. Without these elements, enterprises will struggle to drive meaningful, long-term results.

Organizational Design

This is a fundamental that enables enterprises to meet their procurement and business needs. To design an effective and optimal procurement organization, a number of key factors, including ongoing category management program, CRM approach, centers of excellence (CoE) and tactical buy desks need to be considered. Enterprises can also look at deploying shared service centers or procurement-led CoEs to assist with tactical spend activities. In fact, many enterprises today have a procurement BPO provider supporting their tactical sourcing.

Category Segmentation

The ideal way to segment categories is not just in terms of supply markets of lower-level commodities but also in a way that taps into demand needs. For example, an outsourcing service-provider market could be fragmented under various spend categories for IT, HR, finance, etc., but a more extensive category structure and strategy might create a mega category around outsourcing that aggregates these categories.

There can be several factors that go into deciding how to segment categories into the appropriate spend management approach. However, the most critical aspect is to strike the right balance — global or regional or business unit category management, strategic sourcing or tactical sourcing.

Talent

Category management as a program is inherently expansive. Therefore, the capabilities of the consultants need to be equally expansive. A category management consultant should be able to address key aspects such as relationship management, communication, program management, change management and leadership. Increasingly, category managers are being hired from elsewhere in the business to ensure deep domain expertise, which is integral to building credibility with stakeholders.

Category Management Platform

While many procurement software tools on the market can help streamline sourcing or spend analysis, they don’t quite have the features to support ongoing category management. Majority of the solutions today have the requisite individual building blocks like being able to import and display external market intelligence, monitor category-level risk, view supplier performance, post/share/comment on topics with other internal stakeholders, create savings opportunity assessments from spend analysis, and track ongoing performance in a savings dashboard. However, it’s the ability to bring all these together that is missing.

One important consideration while looking to enable category managers through software is the possibility of consolidating all source-to-pay solutions on a single platform. This helps avoid the integration work required to pull together all the previously mentioned building blocks into a single view.

Conclusion

Given the focus on extending procurement’s strategic reach, category management perfectly fits the existing narrative as it can serve as a vehicle for rapid procurement transformation. However, it’s one thing to plan and another to successfully implement it. To drive an advance program, procurement organizations should ensure they have the right foundational elements.