As the retail industry continues to boom many category managers find themselves lagging to adopt the best practices pertaining to procurement management. There consequently emerges a need for enterprises to invest in resources that allow them to acquire deep know-how of their supply chain, recognize opportunities, and take steps towards effective decision making.
Companies can discover opportunities by leveraging customized intelligence relevant to their supply markets offered by market intelligence and compliance solution providers. It enables them to improve their category management.
What Is It?
Category management refers to a strategic procurement approach where enterprises categorize their spend into areas comprising of similar products. It facilitates focus opportunities for efficiency and consolidation. It can involve the splitting of indirect and direct products. It can also entail dissecting products on the parameters of supplier, value, volume, or type.
ABC Analysis and Pareto 80/20 rule are the two theories that get utilized for dissecting the products. These models enable identifying areas where high levels of spend come and where you should place your focus.
This strategic procurement approach provides in-depth knowledge and understanding of the market, suppliers, products, and the supply chain for developing strategic category plans. This high level of supply chain mapping considers environmental, political, and social factors for effective risk management.
When appropriately implemented, the best practices for this strategic management procurement approach can bring about a 360-degree turn in an enterprise’s profitability.
- Identification of the significant category drivers
The most crucial thing for category managers is to acquire knowledge of the category drivers. You cannot carry out this procurement approach with much efficacy in silos. Instead, you can view it as a shared responsibility and philosophy. It is the continuous process carried across the diverse enterprise’s departments that power supply chain efficiency. Every member has to understand its philosophy to get inputs and recommendations for various departments.
- Get trained in diverse spheres.
There’s a need for category managers to become aware of all the resources and materials invested for proper management. Category managers also need to upgrade their talent and skills consistently. This procurement management strategy is an ongoing process with diverse duties, from planning to financial accounting. Category managers thus should be thoroughly trained in a variety of spheres.
- Know when the operations get conducted
Enterprises absolutely need to know at what time the operations are conducted along with the required performance tracking structure. Consistency in the process assessment is a crucial factor for ensuring a regular maintenance procedure. For the purpose of evaluating the efficacy of their techniques and strategies, the procurement managers should identify critical performance measurement metrics. It will enable them to measure the entire performance correctly.
- Formalize the management process
You can create a great management strategy by addressing key areas like:
- Defining the categories in the supply chain that need management, like human resources, security, medical, etc.
- Analyzing the spending. There’s a need to find out how you will track the spending and manage it in each category.
- Analyzing the market. Find out every category’s supply market condition and the vulnerabilities that can damage the supply chain.
When the procurement team effectively uses category management, it enables you to take a data-driven stance for managing your spending. You need to develop the best management practices to attain good clarity into your spending and gain valuable insights from its data analysis. It is the way to experience ongoing profitability.