9 Mar 15

A fresh look at category management

A fresh look at category management

You know the story, it’s that time of year again (budget, strategic planning, major re-forecast coming around), so let’s dig out those category strategies and run them through the machine. Procurement teams (and perhaps even some stakeholders too?!) sat in darkened rooms, critiquing various category plans across the business, then (re) approving them and off we go again! I’ve seen many procurement teams where the process of completing the plan, then reviewing it internally with procurement colleagues, has become the end as well as the means – but it should not be this way!

Category management is at the heart of what procurement is all about and a critical enabler for us to deliver value for our organisations. It provides the framework within which strategic sourcing, supplier relationship management (SRM) and contract management all sit. Many procurement teams, though not all, would say the category management cycle (and strategic sourcing process within it) is now well-established practice. But is it so well-established it is in danger of becoming too routine?  

Is it time for companies to take a step back and review how effective their category management really is?

The term ‘category strategy’ itself suggests one of the keys to success is good quality thinking, ideas and the development of a game-plan for the spend area. For this process to be really powerful and add value you are going to need:
  • Good governance and a robust process to work with
  • Technology to deliver meaningful data and analyse it
  • A capable, multi-skilled, passionate and knowledgeable procurement team
  • Excellent engagement with stakeholders, including a toolkit to help them through the process

The most meaningful and impactful category plans and, most importantly, those that deliver incremental business value are brief, extremely clear and to the point. To engage stakeholders around the business (and, for that matter, the procurement team themselves), churning out 100 pages of repetitive, detailed and fruitless analysis is, to say the least, a turn off. A handful of highly visual, focused insights presented well, can easily be more effective than lots of charts showing detailed analysis while failing to draw key conclusions and drive strategic thinking.
Over the past few years it has often been said that successful procurement is as much about engagement and change management as it is about traditional skills of negotiation, tendering, etc. So, on that basis, what matters is how well  the category plan resonates with stakeholders. What’s in it for them? Has their involvement been visibly demonstrated? And what’s going to make it happen? 
We suggest the key constituents of an effective category strategy can fit neatly into four key areas:
  1. Prepare and understand business requirements – listen and learn
  2. Strategy development –  quality thinking on how to create value
  3. Implementation of strategic sourcing – capture value
  4. Supplier management – enhance value post-contract
If the process and tools do the work for the category manager they are free to think; giving full and proper consideration to their strategic options and then developing their implementation plans. This is where procurement can really add the most value and bring their full potential to the organisation. It is also what the best procurement people want to be doing, enjoy doing and, therefore, will do with the greatest energy, passion and enthusiasm.
To re-cap, category management serves as procurement’s key overriding vehicle to support delivery of incremental value to the organisation – strategic sourcing, SRM and contract management are all sub-sets of the over-arching category plan. On this basis, surely it’s time for a refresh to ensure this highly visible symbol of what procurement is all about remains fit for purpose? 
Contact Chris Thomson, Head of Strategic Sourcing at State of Flux on +44 (0)2078 420 600 or email him at chris.thomson@stateofflux.co.uk for a fresh perspective on how you achieve the optimal balance between cost, value, quality and the supplier relationship, while delivering those ever-tougher procurement targets.