The strategies and tactics that procurement professionals develop and choose to implement often affect one another. This is because there are certain tactics that pair well together, and when done correctly, each is elevated by the presence of the other. Constructing a strategy out of complimentary tactics, then, is a good way to optimize value throughout your procurement process, and the organization as a whole. Strategic sourcing is a relatively general strategy that many organizations aim for, however, there’s more than one path to get there.
Before choosing a path to venture down, though, one must first be comfortable with their understanding of both category management and strategic sourcing as concepts, and how they function in the context of procurement individually.
What is Strategic Sourcing
Strategic sourcing is the systematic process of driving the lifetime cost of a contract as low as possible. This is an important concept to clarify, however, because at first, it might seem like strategic sourcing is only focused on saving up-front dollars. On the contrary, strategic sourcing aims to consider the quality of vendors and therefore the quality of the contract over the duration of its life.
This process, then, builds value into the organization by developing a pipeline of contracts that have a higher average value than that of the competition. This is a strong advantage to have, that leads to years of cost-savings without sacrificing quality. The seven-step strategic sourcing process is ProcurePort’s guide toward building a comprehensive strategic sourcing strategy for your firm.
Category Management
Category management is a procurement tactic in which widgets, goods, and services are grouped into packages based on similarity. Then, these units of grouped goods and services are treated as a singular bunch for the intents and purposes of procurement. In other words, rather than dealing with thousands of procurement activities for a variety of sizes on a single screw and bolt, manufacturers can treat the entire unit as a single procurement activity, reducing the amount of time, energy, and manpower that’s needed. In turn, this creates organizational efficiency.
Category management is also beneficial as it can potentially drive procurement prices down even further. Through creating even larger bulk-buy purchases on entire categories, vendors and suppliers will continue to drop their prices on a per-unit basis; knowing the volume of work will make up the gap.
Elevating Strategic Sourcing Through Category Management
By building a category management strategy that purposefully addresses the goals of strategic sourcing, your firm will be well on its way toward a successful, and optimal procurement department. Category management walks hand in hand with strategic sourcing, as it allows for larger contracts and fewer procurement activities.
The larger contracts are good for at least two reasons. The larger contract that your organization can provide to a vendor, the more likely that vendor is to drop their price even further. Not only that, however, but the larger, and longer, that a contract extends to a quality vendor, the better it is for you and your firm.
Fewer procurement activities on a category mean less time spent on that procurement category. This translates into time savings and higher rates of efficiency all throughout the procurement department, which even makes it easier to conduct the spend analysis.
Final Thoughts
No matter what your procurement strategies turn out to be, and there are a lot of them to choose from, it’s important to remember that there’s no one-size-fits-all when it comes to procurement, and there are many paths to take toward the same goal.
Strategic sourcing and category management are a strong pair of tactics to couple because of the way that they assist one another in tackling the same goal, while also covering areas and facets of the procurement process that the other doesn’t quite reach. Regardless of your solutions, however, implementing procurement software is a widely accepted industry-standard and best practice, and will elevate your business to the next level.
For more information on strategic sourcing and category management in procurement or anything else related to the procurement life cycle, keep browsing ProcurePort. ProcurePort is the internet’s premier place for everything procurement, from knowledge and information to software and technology, and everything in between.
