During the COVID-19 pandemic, global and domestic supply chains were stressed harder than ever, illuminating the unexpected fragility of our economic supply chains. While we’ve certainly made recent strides and are getting closer to the other side of the COVID-19 pandemic, there’s a lot we can learn looking back over the past year, especially in terms of procurement. One procurement strategy that’s rising in popularity after the worst of the pandemic is category management.
In the wake of supply chains falling apart, and the majority of the public falling into a period of total uncertainty, both procurement professionals and suppliers/vendors alike are looking for ways to bolster the security and longevity of their supply channels. Category management allows for a more efficient series of processes aimed at addressing the consistency and quality of your procurement department.
Grasping Category Management
Before implementing category management it’s important to have a comprehensive understanding of what exactly it is, and how it can benefit your organization, specifically.
At its most basic level, category management is a procurement strategy in which materials, goods, and widgets are divided into similar groups; from there, each group is then treated as a single procurement unit in which all of the procurement activities are managed simultaneously for that grouped category.
By grouping like-products together, your company is able to take a more eagle-eyed approach to procurement activities on a daily basis, rather than being bogged down by innumerous smaller tasks. Think about the benefits of whole-sale for a moment, by purchasing in bulk, individuals are able to save both time and money, this is sort of the idea around category management as well; by treating these larger groups as single procurement units, your staff saves both time and money, while creating natural efficiencies within your organization.
Category Management and Sourcing
Category management is often delegated as a part of the role of a sourcing specialist on a procurement team. This is because the sourcing specialist has a vital role in the way that procurement activities actually play out within the department. For instance, if a sourcing specialist is treating the procurement categories as individual pieces rather than a whole unit, this can lead to major issues in everyday operations, inefficiencies, and wasted dollars.
On the other hand, when a sourcing specialist is on the same page as the rest of the team and successfully implements a category management system, then, in theory, everything should be smooth sailing.
Implementing Category Management
Actually, implementing category management in the supply chain is the next chapter that comes along in the procurement storybook. Understanding what comprehensive category management looks like is important, but building and implementing the strategy into your organization takes dedication and organizational alignment. One of the most important aspects of modern-day procurement strategy is the software that your organization chooses. Procurement software is constantly evolving and modern-day procurement technology is both sophisticated and powerful.
Implementing category management into your supply chain strategy will require the appropriate software that enables your staff to handle bulk procurement actions for the grouped categories in an efficient and organized manner. Additionally, contract management becomes specifically integral to fine-tune when building a category management strategy.
Contract management is a vital aspect of procurement regardless of the specific strategy your organization installs, however, its importance is emphasized when it comes to category management due to the nature of the groupings. Since the categories should all consist of similar products, items, or sourced goods, it’s easy for the software to funnel the appropriate resources into each category. However, the tricky part is separating any individual contracts that might result from a single category. Then, anyone contract that pertains to a portion of a category can be separated and analyzed on an individual basis, which is important to gain insights into impactful data like spend analysis.
Taking the time, resources, and energy to build and implement a category management strategy is a hefty commitment. After all, Rome certainly wasn’t built in a day, so there must be a strong pay-off. Well, firstly, it’s important to remember that when it comes to procurement, there is no one-size-fits-all strategy. That being said, the organizations that choose category management as their supply chain strategy see a wide range of benefits.
A few of the benefits that category management is capable of yielding include, higher quality products, greater savings, and better resource management, and a stronger sense of both market trends and market values giving you an edge in the bidding and auction processes of procurement.
A Quick Overview on Category Management
Category management is the procurement strategy in which like-products are grouped together and treated as a singular unit. This leads to organizational efficiency, greater savings, and frees up employee time to focus on more important business activities, and innovation.
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