Procurement and supply chain have certainly become the two important aspects of various organizations globally. However, as a result of increased internal and external factors, managing both of them is interestingly challenging. In the quest of identifying real corporate needs and finding ways to influence business decisions, Category Management is playing a vital role.
In the wake of technology oriented business, implementing category management to your firm, has been considered as an initiative to be a valuable and profitable. Indeed, category management is an effective way of generating sales by compiling market data. If you monitor buying trends closely, you will see that this concept generates an easy way of updating figures. Currently, this concept has been endorsed by many buyers and suppliers who seek to promote the sectors they deal with in terms of sales.
What is Category Management?
Category Management is a disciplined approach to managing a product category as a single strategic business unit. It is a retailing and purchasing concept within which the quantity of products purchased by a firm or sold by a retailer is classified into distinct groups. The classification is done on the basis of amassing the products into similar or related groups. These same groups are then referred to as being product categories.
In Procurement this same strategic approach is adopted in order to organize resources used to focus on specific areas of spends. By so doing, category managers can allocate time to conduct an in-depth market analysis, allowing them to take proper decisions for the organization.
How can this help them?
- Buy more effectively
- Increase sales
- Save significant amount of money in procurement
In Supply Chain, category management increases the chance of reducing risks and highlights the value of the overall business from the supply base. This concept enables integration of innovation in supply chain granting suppliers more time to introduce new product categories in an organized method. There is a better scope to shed more light on promotional activities and enhance them. By being on the same wavelength on profitability targets and strategies, category management breaks the barrier between procurement and supply chain. It encourages exchange of information, sharing of data and joint business building.
What are the overall business benefits?
Category Management in a cross functional process:
After its advent in the business arena, category management has been developed and adopted by organizations worldwide. The concept has no standard process as such, since its strategies are made to adapt every business situation. In a cross functional methods, internal stakeholders along with external stakeholders of the company, use the concept to enhance business process of each category. It is important to identify the cross-functional use of sourcing and contracting options to create an impeccable category management.
Processes to consider:
- Initiation phase
- Analysis phase
- Category strategy creation
- Category strategy implementation
- Continuous improvement
How to get started?
Benefits in category management are enormous. As a business person, you have the opportunity to control, influence and decide how the category should be. You should be able to determine the various advantages your business will benefit. Adopting a strategy such as category management will determine your current and future steps to enhance procurement in your firm and see how to merge the process with supply chain.
A consistent strategy would be determined by the six steps below:
- Category Definition – determining the category your product fits to
- Analysis – Identify sales & previous ROI
- Strategy – develop demand and supply strategies according to the category
- Tactics – Show how the assortment, pricing and promotions should be
- Plan implementation – implement a category business plan
- Category review – monitor the process of the category management
To develop your strategy here are some questions you should consider:
- What is the mission of your organization?
- Where you are currently positioned on the market?
- What are your corporate goals?
- Who are you targeting?
- What are the strategies related to pricing, promotion, customer engagement and supply that you want to use?
For an in-depth learning and practice, grab some essential live videos demonstrating category management steps and strategies on YouTube Procurement Academy.
The slightest change in demand and supply on any given day may require an ‘on-the-spot’ decision making and this where category management steps in. So basically in a firm, category management helps to center your focal point on most important business categories. This concept allows a better inventory of your products, in addition to this; it also lets you calculate the amount of profits being generated. Other than that, you can have a clear picture of the resources that have been allocated in the process.