When it comes to procurement efforts there is an entire library of information on tactics, strategies, and practices. There’s almost so much information that it’s difficult to sift through at times. Two of the most common supplier-management strategies in the history of procurement are category management and strategic sourcing. Both are valid options of developing supply-chain-channels throughout your organization, and each come with their own set of benefits. Making the right choice, whichever option seems to be better suited for your organization specifically.
Category management and strategic sourcing aren’t the only methods of developing supply chains throughout your organization, and certainly aren’t the only procurement tactics worth mentioning. It’s worth noting that, especially in modern procurement teams, e-procurement software like contract management software, and procure-to-pay software are highly recommended as industry best practices regardless of which supplier-management strategy your firm employs.
Additionally, each of the supplier-chain strategies covered in this article is well-suited for a modern procurement department already adhering to the industry standards and best practices such as implementing and utilizing sophisticated procurement software throughout the entire procurement lifecycle.
Understanding Category Management Process
Category management stems from the idea of bundling. In other words, category management is when a firm group’s similar products or services into collective units and then conducts all of the procurement, sales, and merchandising activities around each of those units at the same time and uniformly. This type of supplier-chain development works well for all levels of businesses from the store-level, to the industry-level, and everywhere in between.
Category management is also a popular strategy for businesses to employ because it extends beyond just the procurement activities around a business unit. As mentioned above it also includes the sales and merchandising of those grouped units. Therefore, category managers and procurement professionals that have a wider scope of responsibilities can prioritize and build strategies around other business activities as well.
Just like with any operational system you develop in your business, there’s often a cycle or a step-by-step process that’s followed. With category management, this begins with defining categories, and their roles, setting measurable goals, designing and implementing tactics, and then, of course, reviewal. Through a reiteration of the steps involved in category management, a company can devise a precise and extremely effective procurement department that operates smoothly quarter-in and quarter-out.
Digging into Strategic Sourcing
Strategic sourcing is another common procurement strategy. However, unlike category management, strategic sourcing is more solely focused on the procurement activities of the business. Whereas remembering, category management can involve activities ranging from procurement, sales, and even merchandising of grouped units.
The role of a sourcing specialist on a procurement team, however, is a vital one. It’s the responsibility of the sourcing specialist to find, develop, and nurture supply chains that offer the lowest lifetime cost of the contract. A common misconception here is that this means comparing the purchase price or the upfront cost of doing business with a single vendor or supplier. On the contrary, though, the lowest cost of a contract takes into account much more than simply up-front cost and extends into finding the true value of a contract or single supplier.
This can make a strategic sourcing tactic seem a bit more ad-hoc in nature than a category management strategy, but one of the vital aspects is considering the lifetime value of contracts and procurement activities.
No matter which supply-chain development strategy you choose to implement into your company; it’s vital to ensure that your team builds a process around that strategy. ProcurePorts seven-step strategic sourcing process is a great place to start building your library of information from which to pull while developing and planning your procurement strategies.
Category management and strategic sourcing are two of the most popular procurement tactics to date. Each comes with significant benefits and is aimed at reducing the overall cost of your procurement department while ensuring that operations are continuing to run smoothly, and each is designed to be compatible with modern e-procurement tools and software.
For more information on category management or strategic sourcing, keep browsing ProcurePort. ProcurePort is the internet’s premier place for everything procurement from software and technology, to information and knowledge, and everything in between.