Many organisations believe they are employing category management when in fact they may have put in an organisation design that means buyers are broadly responsible for spend and suppliers within a category but are still in fact ‘buying’ – that is running a procurement led process where they are fundamentally following a traditional sourcing approach (RFx. eAuction) after perhaps some rudimentary spend and supply market investigations.
Category Management is so much more than this. sobitech Firstly it is not a procurement led process, it is a business process. It is usually facilitated by Procurement – much as HR facilitate the processes around annual salary & development reviews but crucially the business considers it their process and is widely considered as the one way of working across the enterprise when it comes to buying goods and services.
Another popular misconception is that Category Management somehow refers to the sourcing side of Procurement activity alone. Again, this is seriously undervaluing what Category Management actually is. Category Management is, in fact, a strategic end to end process for achieving value from the purchase of goods and services on behalf of the business. The process seeks to align business goals and customer requirements with the capability of the supply market to reduce cost, reduce risk, improve service and improve revenue.
Organisations that lead in procurement capability have a Category Management process that has, in fact, 3 critical elements. These are Category Planning – the annual planning of both sourcing and supplier management activities, Strategic Sourcing – the creation and implementation of category strategies and Supplier Management which is the management of supplier performance and value improvement.
One thing that is true about Category Management is that real Category Management is a highly complex process to execute robustly and requires a specialist skillset both in the hard skills of procurement but also a high EQ around behavioural skills. Category Management is a true cross functional approach where team working with business stakeholders is required to understand what it is you’re trying to achieve and explore the various cost drivers, data sets, opportunities together to build a strategy that is truly representative and appropriate to the business context. Understand how to work with people to facilitate & influence the process towards a common goal is no mean feat.
To some extent the hard skillset (the Procurement tools) can be codified and made explicit and typically follow key steps to Form the Team, Analyse data sets, Create strategy, Create & manage the implementation plan and finally, review progress whether from a sourcing or supplier management perspective. Category Planning will look slightly different but the most thorough planning processes follow a step process – reviewing the benefits from last years’ plans, Engaging the business for their targets and issues and finally creating the new plan for the next year based on prioritising all the opportunities across the whole category. Leaders in this space equip facilitators of the Category Management process with detailed “how to” guides & templates ideally through some kind of on line collaboration tool to ensure all categories are run with consistency which helps to drive efficiency of operations. The most competent practitioners know how to modulate their approach to suit their circumstances – although organisations that ensure they follow a rigid gate review process are able to challenge in a timely fashion that any ‘skipping of steps’ is done for sound commercial rationale and not just because it’s difficult or not enjoyable to do.
The softer skills required to execute great Category Management – which is in effect a project based activity – are much more difficult to codify although there are many great maps and tools that help stakeholder engagement & influencing and the creation of communication planning. Probably of greatest importance in this, is the understanding of self first as an individual to ensure you play to your own strengths. As, put simple, recognition of your own preferences will help you identify the preferences of others and adapt your style to suit.
What is clear is that leading such a complex process is difficult enough to manage so many people towards a common goal just on the behavioural aspects alone – so those organisations that do not detail the ‘hard skills’ in a consistent, structured and easy to follow manner are simply adding additional complexity that can be avoided.
Future Purchasing are world leaders in applied Category Management. The three core processes of Category Planning, Strategic Sourcing and Supplier Management are the key components of our category management approach which identifies five building blocks that need to be in place for successful application of category management. These are:Build, Learn, Lead, Apply and Deliver. Click on the link to see loads more info in our Knowledge Hub.