What is procurement category management?
Procurement category management is a strategic pathway wherein companies can segregate their expenditure into sectors that consists of a particular category of products. Such an approach allows organisations to concentrate more on opportunities for efficiency and consolidation.
Category management might involve the separation of indirect and direct products and services. This separation can be built up from parameters such as volume, type, supplier, and value. Category management thus assists companies to analyze their expenditure in each of the categories and focus more on strategic initiatives.
What is the category management process?
An array of steps drives the category management process. These steps include the following:
- Initiate – You have to start by forming and defining each of the categories. This will assist you in further segregating your products and services.
- Prepare – Once you have defined the categories for your products and services, you need to establish a vision. This will assist the category managers to manage your inventory better and keep the progress of the company in line with your goals.
- Prioritize – You also need to set specific objectives that will be a part of your company’s vision. Objectives for a local can be to source products from suppliers from the same county or region within the next 2 years.
- Implement – Once the senior management approves the strategies which you have set in the firm, then you can move towards the implementation stage. The category manager now has to work in tandem with stakeholders to ensure the efficiency of processes. This is the very reason that the strategies set have to be supported by all members in the organization for high effectiveness.
- Maintain – To ensure that company objectives are achieved via implemented strategies, category managers can employ service level agreements (SLA) and key performance indicators (KPI). These SLAs and KPIs can then be monitored continuously to evaluate the performance of employed strategies. The SLAs and KPIs have to be scrutinized and ensured that they carry value before their employment.
- Improve – The categories formulated need to be evaluated at regular intervals. Many organizations have defined time intervals for inspection of categories. Procurement is known to be an evolving function, and hence a category that was relevant at the beginning of the process might turn out to be obsolete later on. The process of evaluation is thus extremely important to ensure that categories stay relevant to the organization, and are in line with the company’s vision.
The category management process is not a hard-and-fast depiction of steps. These steps can be altered as different category managers will have different requirements. The structure of the category management process provides managers with a starting point and guidance to formulate a comprehensive process for procurement.
What is the importance of category management?
Category management has become vital for organizations in today’s hyper-competitive environment. This process empowers procurement professionals to divert their times and resources towards analyzing the market. Such an approach assists category managers to leverage their negotiations and appropriately manage their suppliers. Category management thus assists the managers and team members to organize resources and enhance their supplier relationships. The process also assists to gain an in-depth understanding of all the categories in the organization, and how each of them can assist in risk management.
What are the 4 Ps of category management?
- Product – Each category should have an appropriate stock-keeping unit (SKU) which reflects the mission of the retailer. The role of the category for a particular store is dependent on the variety of a certain product. This can reflect necessity, diversity, or quality, among others.
- Price – The price of a product or service is a crucial aspect and should be placed appropriately to attract shoppers.
- Placement – The placement of products is another important aspect and needs to be carried out efficiently. A well-merchandised product can be assembled in a showcase or a shoppable fashion.
- Promotions – To make the most of categories, a firm or a store needs to carry out periodic promotions. The promotions should depict the nature of the product and its importance, whilst urging shoppers to give it a try.
Category management can vary as per the specific requirements of a company. Depending on the person, your approach, category management can be described, approached, and accomplished in different ways. This suggests that you can create a strategy that befits your needs and requirements. Category management will assist you to focus on promotions, inventory management, product pricing, visual merchandising, assortment, and purchasing. So, if you wish to take your business to new heights, start your category management process today.