The Golden Rules of Category Management Strategy
- Category Management
Too often I hear procurement professionals talking about struggling to implement a firm category management process.
Whether it’s a strategy problem, an alignment issue, or implementation struggles, it seems that category management is a tough thing to get right.
So, I wanted to give my golden rules for category management and my tips for building a strong category strategy.
What is Category Management?
Before jumping into these golden rules, first let’s recap what category management is. Category management has a decades-long history that has led us to our modern understanding of procurement categories.
Created in the 1980s, category management was originally the process of grouping products into categories based on how consumers used them. Originally coined by marketing teams, category management helped retailers increase sales by minimizing unproductive competition between their own products.
Today, the term has evolved to identify a process for improving efficiency in supply chains, but at its core, it is still about grouping items to maximize value. According to CIPS, category management is a strategic approach that organizes procurement resources to focus on specific areas of spend.
Category managers can zone in on one specific category and conduct market or pricing analysis for that particular group. By leveraging this in procurement decisions, they can create higher ROI than traditional purchasing models.
My Category Management Strategy Golden Rules
Rule #1: Align Your Overall Strategies
One of the biggest pitfalls when trying to implement any new process or technology is the lack of strategic alignment across the business.
Many times, processes can become siloed and have separate strategies all to themselves. This can become very detrimental to both the new process being implemented and the business at large.
When trying to develop and implement a category strategy it is important to keep in mind the overall business strategy. You need to align them and factor in any technology, sourcing, and risk management strategies to avoid being ‘left behind’ as the business’s strategic roadmap unfolds.
Otherwise, you risk creating a sound category management strategy on paper but ultimately one that doesn’t fit your specific business needs.
Rule #2: Collaboration is Key
This leads to another very important piece: cross-functional collaboration. The importance of assembling a comprehensive team of stakeholders when developing a category management strategy cannot be stated enough.
You need to have people who will be using the system, people who might own any specific category, as well as the team who will own the strategy itself on top of any different regions and important business units.
Only then can you get real actionable insights and gain a full understanding of the use cases that will be addressed in your category management process.
Cross-functional collaboration further underlines the importance of aligning strategies from the top down. You need to have groups from across the business buy into a set of uniform processes to keep your category management both efficient and effective.
Rule #3: Don’t Be Afraid to Evolve
The only constant in this world is change.
Your business needs will evolve. You have to be proactive and flexible when it comes to evolving your category management strategy along with it. It all goes back to aligning your strategies and keeping business needs in mind. If you don’t evolve with the changes, you will get an ineffective and outdated category management strategy.
This is really highlighted by the Covid-19 pandemic and how much it has changed the business landscape. Supply chain, sourcing, and risk management all play key roles in an effective category management strategy, and most businesses have changed their outlooks and needs significantly to deal with the disruptions of the virus.
While we can all hope that something of this scale won’t happen again anytime soon, we all have to be ready for such disruptions and evolve with them, big or small.
Rule #4: Trust your Data
The analytics are your friend. As long as you are providing relevant and clean data the insights you receive will be actionable and valuable.
Analytics will provide much-needed visibility into performance – or a lack thereof in some cases.
It will answer some of the most important questions like what strategies are you using currently? How can you best reduce costs in this category? Who will be responsible for executing the operations and actions that result from the strategy? Are there any new market factors for either the supplier or procurement that we cannot control?
Getting the answers to these questions will be what takes your category management strategy to the next level – and it all starts with trusting your data.
Rule #5: All-In-One Solutions Give a Competitive Advantage
Maybe not so much of a golden rule, but here’s a free piece of advice from my experience: an end-to-end solution like JAGGAER ONE ticks all the boxes I’ve been listing above.
Do you want to align all your strategies, maximize collaboration, and gain valuable insights and automation? Manage all your processes in one place that’s easy to use, provides visibility across the business, gives a standard set of processes for effective collaboration, and provides powerful and actionable insights and recommendations thanks to AI.
You can manage everything from source to pay with seamless integration into your ERP with JAGGAER ONE. This is going to remove the guesswork, streamline processes with automation, and truly allow you to focus on building a strategy that is both proactive and highly effective.