From Analytics to Action: The Technology Side of Category Management

We’ve been on a journey to better understand the discipline of category management, including why its benefits are simultaneously desirable and elusive. For most procurement organizations, category management is recognized as a process rather than a technology, but this likely does not represent the full picture.

Much like strategic sourcing, which is a common procurement process that few would consider executing without supporting technology, category management is both a process and a set of actions that cannot be executed at scale without technology.

However, unlike sourcing technology – which encapsulates the process and facilitates communication and information retention – category management requires analytical support as well.

Category management asks procurement to examine spend and suppliers above the contract level. The information included in a comprehensive category management dashboard starts with the inflows of information from all of procurement’s other processes and technologies.

JAGGAER recently partnered with Buyers Meeting Point to author a white paper looking into the technology implications mature procurement organizations need to consider when investing in category management. Driving Enterprise-wide Savings with Mature Category Management discusses the importance of building an analytics dashboard and leveraging a category management tool. Together, these complimentary technologies bring embedded intelligence within procurement’s reach and inform the actions of each project team.

Rather than looking at historical demand by supplier or in a given category, procurement will want to simultaneously explore how the demand for different but related products and services changes over time as the business responds to changes and opportunities. This is a far more complex way to approach the management of spend and suppliers, and without the proper analytical support, it can be nearly impossible to take appropriate action.

Advancement Through Embedded Analytics

The idea of ‘embedded intelligence’ is focused on the context and agility that must be present in every procurement process and decision. The same expectation needs to be made of our technology. The closely related idea of ‘embedded analytics’ is critical for category management, since the more data procurement pulls together, the more (preferably automated) assistance they will need to recognize patterns that require changes or represent opportunities.

Combining Internal Results with External Influences

Since category management combines multiple suppliers, spend categories, and contracts into a related block for management, no two companies will define their categories the same way. Nor will any two categories have the same objectives and goals. A category management dashboard can provide contextualized insight into how strategies are performing given the current market conditions or competitive landscape, and which activities are powering those results. Procurement can then alter their approach or emphasize the strategies leading to the most desirable outcomes. The insight provided by a category management dashboard puts procurement in control of spend, whether they are driving a new initiative or taking action to mitigate the impact of an external disruption.

Stakeholder Support and Nuanced Adjustments

While the primary objective of category management is to manage spend and suppliers at a higher level in return for a more expansive and sustainable ROI, procurement still has to be able to work at all levels of their stakeholders’ interests and respond to detailed needs with fact-based answers and advice. Spotting a problem – or an opportunity – when it is small is a critical capability, as is delivering detailed answers to stakeholder questions. A dashboard that connects visibility with control not only ensures accountability, it makes it possible for procurement to monitor risk.

Having a category management dashboard is critical, but even the best dashboard does not substitute for the decisions it is intended to support. Procurement must play an active role in building the dashboard and overseeing the technologies that contribute data and represent the spend and suppliers they are responsible for managing.

Capturing the outputs of spend analysis, sourcing, supplier management, and

contract management in one place sets the stage for procurement to pre-qualify or determine the specifications and requirements for new and/or alternate suppliers. Algorithms can also be applied to continuously check customer data and provide recommendations that help companies increase their knowledge base and market share.

Embedded analytics presented in a visual dashboard presents data in the context of the business decisions and results procurement is working to deliver. Data takes on new dimensions and empowers procurement to see the impact of many changes and activities happening in parallel as a coordinated ecosystem that they can manage.

Recognizing the connections between understanding, insight, and action will allow procurement to set solid strategies in motion and recognize when adjustments need to be made in response to changes, both inside and outside of the company.