Authored by Fayaz Haq
This is the first in a three part series of posts on Category Management where we will look at the benefits of Category Management and identify the factors that ensure a successful programme, but to start with, we will answer the question; What is Category Management? Category Management is a strategic procurement approach that focuses on optimizing an organization’s spend on goods and services. It is process based and incorporates business improvement in hand with change management. This is largely due to the fact that a successful Category Management program requires the active participation of and engagement with stakeholders, functions and individuals across the business.
Category Management adopts the use of a number of levers by understanding what an organization spends and the total cost of ownership as well as an understanding of supplier economics and industry drivers. Using a category segmentation approach, the organization works cross functionally by examining the entire spend category and the manner in which products or services within the category are consumed. An extensive review process is structured to challenge what was done before, and seeks out to implement breakthrough opportunities that will generate significant value for the organization.
Areas of interest across many organizations typically focus on strategic categories where spend and risk are high, lead times are extended or product and/ or service delivery are fairly complex.
Organizations in the Oil and Gas sector may be interested in adopting a category management program for drilling operations while for the Aviation sector this could be in-flight catering services or uniforms for flight attendants.
In summary, Category Management is nothing more than a strategic approach to maximizing business profitability and can result in significant advantages (beyond the bottom line) for organizations that adopt a mature approach by following a formalized and structured category management program.
Stay tuned for Part 2 on the benefits of Category Management