Does Your Business Really Need Category Management Procurement
The category management process is a strategic approach to procurement in which businesses divide their spending into categories with similar or related products, allowing for greater efficiency and consolidation.
A Category Management strategy can refer to the separation of direct and indirect products or services, as well as the division of products or services based on value, supplier, type, or volume.
Did You Know? The category management process is jointly owned by the retailer and the vendor.
FOCUS POINTS:
- Category Management Procurement experts focus their time and do market research in order to fully leverage their agreements and manage their vendors in accordance with the company’s goals.
- Category planning aids in the organization of procurement resources and adds to economies of scale and improved supplier relationships.
- To build a category management strategy, category planning provides a greater understanding of the industry, goods, suppliers, and supply chain.
Investment And Average Supplier Lead Time In Category Management
Project Procurement VS Category Management
CATEGORY MANAGEMENT
PROJECT PROCUREMENT
1. Used to simplify a product’s demand and bring a larger contract to market.
- Frequently used in reactive procurement.
2. When used appropriately in strategic procurement, it lowers unit pricing for customers.
2. Short-term victories with fiscal payoffs for stockholders are the focus.
3. Purchase administration is centralized, which reduces confusion with suppliers and streamlines compliance activities.
3. Project management skills are essential for a project procurement manager and team, but they can also be used as a crash course on the procurement lifecycle.
4. Long-term value development with suppliers and stakeholders is a priority in category management.
4. Supplier agreements and collaborations that are shorter in duration, focusing on leveraging competencies and cost reductions in the near term, or saving time through an expedited tender.
5. Category planning enhances insights and knowledge for specific categories to help establish a competitive advantage.
5. Your procurement organization can acquire more effectively in ad-hoc scenarios if you develop a sound project procurement approach.
Which Is Best: Category Management vs Procurement
The question of whether category management or procurement is better for a business largely depends on the specific needs, size, and scope of the organization. These two functions, while closely related, play different roles within the business structure, each with its unique benefits.
Procurement is a broad function that involves acquiring the goods and services a business needs to operate. It includes everything from identifying and evaluating potential suppliers, negotiating contracts, managing supplier relationships, and meet the business’s quality requirements.
Procurement is essential for every business, regardless of size, and focuses on ensuring the best value in terms of cost, quality, and service. It helps to maintain cost efficiency, manage supply risks, and ensure a stable supply of goods and services.
Category management can help businesses achieve greater cost savings, improve supplier relationships, and drive innovation. It allows a company to make more informed and strategic decisions based on the specific needs and trends within each category.
However, category management might not be necessary or feasible for smaller businesses with less complex procurement needs. Also, it requires significant resources and expertise to implement effectively.
Both procurement and category management have their unique advantages. While procurement is a necessary function for all businesses, category management is a strategic approach that can bring additional value in certain contexts.
Let’s Evaluate How Category Management Procurement Impacts Your Business
Check out the upsides of having a proper category management process in place:
1. Cost-cutting possibilities: The expert application of the category management process leads to significant cost-cutting opportunities.
2. Better risk management for vendors: Category management procurement aids in gaining a thorough understanding of each customer in order to provide better food and services.
3. Business approach that is more streamlined: Any organization can achieve strategic goals with the support of certain tailored category management processes, goals, and tactics.
4. Data on spending is centralized: Tracking, charting, and reporting are all made easier with centralized data.
Now consider the challenges that come with category management procurement:
- Give customers a compelling reason to choose your service above others.
- Convince retailers why they would need your product through creative curating.
- Make oneself indispensable, according to a rebalanced perspective.
- Taking a step outside of the category: examine the full store.
- Give customers consistency and clarity by going omnichannel.
- Making it simple for businesses to implement in-store.
Final Words
Shorter supplier lead times and faster PO processing can be found in organizations that use category management strategy as part of strategic sourcing and procurement operations. This is true for the best, middle, and worst performers. The causes for these discrepancies could be related to an organization’s professionalism in identifying and evaluating suppliers within a specific category planning, as well as its cooperative partnerships with those vendors. Contact us today to avoid the challenges mentioned above and we will help you achieve your goal.
