Category Management is a systematic approach to procurement in which companies divide their expenditure into categories with similar or related products, allowing better consolidation and efficiency.
Category management, in general, is the practice of grouping similar items into a single category, or business unit, and then focusing procurement, merchandising sales, and other retail efforts on the category on the whole.
The division of direct and indirect products or services, as well as the dissection of items or services by value, supplier, type, or volume, are the aspects of category management.
One of the main goals of this strategy is to promote the category’s benefits to consumers while eliminating inefficiencies and unprofitable competition among brands and suppliers within a category.
For instance, by integrating procurement activities under a single category rather than by each brand or supplier, this method can help merchants increase profitability on related products in different ways.
Better outcomes, enhanced quality, more savings, effective resource utilization, a better grasp of the market, and a greater focus on collaboration and innovation are all advantages of implementing a category management program.
Effective Category Management Strategy
Category management is composed of multiple stakeholders, demand management as well as the entire supply chain. Effective category management includes, but is not limited to, the following areas:
- Procurement that is both sustainable and ethical
- External influences, market analysis, and market rivalry
- Relationship management with suppliers
- Identification and management of stakeholders
- Communication that incorporates soft skills is effective.
- Evaluation and appraisal of suppliers
- Leading and managing a team successfully
The benefits of Category Management
Category Management aids in the organization of procurement resources and leads to efficient sales and improved supplier relationships, all while acquiring a thorough grasp of how each category contributes to risk management.
To remain ahead of trends, risks, needs, and supply changes, category management undertakes ongoing analysis. Category management also includes a demand management program to help the organization better understand and prioritize the demand structure for the goods and services it uses. This prevents the company from losing funds.
By consolidating and streamlining providers and contracts, category management can help eliminate time-consuming procedures like each business unit’s procurement and purchases. It also gives more power to prioritize and strategize, providing more influence to negotiate lower prices and better service quality from providers.
Procurement professionals can use Category Management to devote their time and do market research to fully leverage the negotiations and manage the suppliers in accordance with the company’s goals and objectives.
To build strategic category initiatives, category management provides a greater understanding of the market, products, suppliers, and supply chain. To manage risk more effectively for the organization, this greater degree of awareness and analysis of the supply chain takes into account environmental, social, and political issues.
With category management, a company is not bound to acquire the same product over and over again. Instead, a company can buy in quantity, minimizing the need for multiple purchases, which can be costly. Because the process isn’t repeated, this reduction in duplication saves time.
Category management is a fantastic way to boost productivity, cut costs, and provide value to the supply chain. To support and drive business decisions, efficient category management demands actionable data. As with other procurement systems, category management should be monitored regularly to ensure that market trends are incorporated