5 ways to succeed at category management

What is category management?

Category Management is a strategic approach to procurement where businesses segment their spend into areas that contain similar or related products enabling focus opportunities for consolidation and efficiency. The procurement department in an organization usually handles spend from start to finish, which means business continuity such as inventory purchasing or procuring for business support such as IT. A strategic approach is needed along with a transparent process to ensure resources are allocated practically and costs are kept as low as possible.

Category Management can include:

• Splitting direct and indirect products and inventory or services
• Splitting products, inventories, or services by value, vendor, type, or volume.

So the time often comes in the business year when the procurement team needs to determine how best to allocate limited resources for the remaining months to make sure business goals are reached. Taking a strategic approach to category management will then involve developing a clear understanding of the organization’s core values and key objectives.

What are the main benefits of category management?

Spend Insights

Strategic category management can help to facilitate a more nuanced and in-depth understanding of your category spend and your negotiations. Using technology to enable data analysis is a handy way of providing actionable insights. With the right type of software, you will be able to configure your supplier data to get a full picture of your supplier base and understand where you can start making gains and where you can start cutting costs. You will be able to identify potential disruptions to your supply chain and work out contingency plans, manage vendors and categories in line with your profitability, risk management, and performance goals, and negotiate with accurate information.

Better Supplier Relationships

We all want to maximize the potential of our buyer-supplier relationships with an agile and well-timed category plan. With a structured plan, your organization can recruit, evaluate, and onboard new suppliers as efficiently as possible, collaborate and communicate with suppliers in a personalized way, and creates opportunities for shared growth. You will also be able to make decisions about replacing suppliers based on sound, reliable data.

Cost Savings

Category management planning can help organizations save money on materials, supplies, and inventory. Streamlining procurement processes makes it easy to see vendor contracts and understand where you could be making marginal gains. You can identify irregular spending and areas that need adjustments so you can start cutting costs.

Better collaboration and innovation

Strategic category management makes it easy to collaborate with your suppliers. Negotiation, conflict resolution, and relationship management are all made easier with a structured approach that emphasizes building sustainable supplier relationships. Your people can spend less time on processing and more time on finding creative, innovative suppliers and market leaders to work with.

How to develop a structured approach to get the best results:

1. Revisit

Before jumping into any tactical activities, set aside some time to review your category plans and identify some areas of interest that may have slipped through the cracks, you are almost guaranteed to find some opportunities to profit from. Additionally, reach back out to your business stakeholders. There’s a good chance you’ve had conversations about potential savings opportunities but couldn’t act on them at the time due to competing priorities.

2. Learn

One of the great things about the procurement industry is the wealth of information sharing. Whether it is category-specific intelligence, macro-economic trends, or Unit4’s own e-auction by Scanmarket’s data, you can quickly find the information you need.

3. Ask for help

If you have a set of attractive savings opportunities available but just don’t have the resources to execute them, now’s the time to ask for help. You can be sure that your CFO also has the end of the year in mind and is looking for every Euro, Dollar, and Kroner out there! Go to them with a simple equation: X additional resources to my team = Y benefit by the end of the year. Where the CFO was focused on controlling costs earlier in the year, you can bet they are focused on profit now.

4. Prioritize

Once you find the savings opportunities, use a structured approach to stage them and allocate your resources.

5. Act

Most importantly, act on the opportunities you find. The best approach is to use a centralized management system such as Unit4 Supplier Management by Scanmarket to get tasks assigned, monitor progress, and identify potential timing issues.

It may seem like extra work when you’re already busy. But by following these five steps, you’ll be able to put your team in the best position to finish the year strong, meet your goals, and not leave any easy “wins” on the table.

How can Unit4 and Scanmarket help your organization?

Book a Free Demo now or click here to learn how to make your spend analysis smarter, and read more about how we help our customers meet their objectives that generates long-term value.