Effective Strategies for Managing Category Management: Personnel, Tools, and Technology

Category management is a retailing and purchasing concept in which the range of products purchased by a business organization or sold by a retailer is broken down into discrete groups of similar or related products, known as product categories¹. For example, a grocery store’s product categories include tinned fish, washing detergent, and toothpaste.

The main goal of category management is to optimize the performance of each product category by aligning business strategy with sourcing initiatives and supplier relationship management⁴. Category management can help retailers and buyers achieve benefits such as:

– Increased sales and margins by offering the right products at the right price and place for the customers

– Reduced costs and risks by consolidating contracts and leveraging economies of scale and scope

– Improved efficiency and effectiveness by streamlining processes and enhancing collaboration across functions and stakeholders

– Enhanced innovation and differentiation by identifying and exploiting new opportunities and trends in the market

However, category management is not a one-size-fits-all approach. It requires a systematic cross-functional process that involves several steps, such as:

– Defining the category scope and objectives based on customer needs, market analysis, and business goals

– Developing a category strategy that outlines the sourcing options, supplier selection criteria, negotiation tactics, and performance metrics

– Implementing the category plan that specifies the actions, timelines, responsibilities, and resources for executing the strategy

– Monitoring and reviewing the category performance and results against the objectives and metrics

– Updating and revising the category strategy and plan based on feedback, learning, and changing conditions

Appropriate personnel, resources, and technology are crucial in effectively implementing category management. Some of the best practices for category management include:

– Establishing a clear governance structure that defines the roles, responsibilities, and accountabilities of the category team, including the category manager, buyers, analysts, stakeholders, and suppliers

– Creating a collaborative culture that fosters communication, trust, and alignment among the category team members and other parties involved in the process

– Leveraging data and analytics to generate insights, identify opportunities and measure performance across the category lifecycle

– Adopting a flexible and agile approach that allows for adaptation and innovation in response to changing customer preferences, market dynamics, and business priorities

Case Studies of Category Management

Various businesses, governments, and not-for-profit organizations have widely adopted category management to create and sustain value. Here are some examples of successful category management initiatives:

– The Queensland Government in Australia implemented a whole-of-government approach to category management that grouped procurement activities into six major categories of spend: building construction and maintenance, general goods and services, information and communication technology (ICT), medical goods and services, social services, and transport infrastructure and services². Each category group was managed by a lead agency and governed by a category council that oversaw the category strategies and endorsed related execution plans. The benefits of this approach included: helping develop and achieve shared longer-term goals; better supporting the government’s broader economic, environmental, and social objectives; enabling a holistic view of industry challenges and market trends; providing for a coordinated approach when dealing with industry and supplier markets; facilitating whole-of-government consideration of how procurement can support policy objectives such as local content and value for money.

– Surefront, a cloud-based product lifecycle management platform for retailers and suppliers, helped its clients optimize their category management process by providing tools for collaboration, communication, data integration, analytics, and automation³. For example, Surefront helped a sporting goods retailer streamline its sourcing process for baseball equipment ahead of the little league season. Instead of negotiating one-off agreements with different suppliers for bats, gloves, balls, protective equipment, and soft goods separately, the retailer used Surefront to pool similar products into a single category. This allowed the retailer to compare offers from multiple suppliers side-by-side, negotiate better terms collectively, reduce per-unit pricing, save time and resources, increase margins

Source:

(1) Category management – Wikipedia. https://en.wikipedia.org/wiki/Category_management.

(2) Introduction to category management | Definitions and best … – Sievo. https://sievo.com/blog/category-management.

(3) About category management | For government | Queensland Government. https://www.forgov.qld.gov.au/finance-and-procurement/procurement/understanding-procurement/about-category-management.

(4) What is Category Management? 5 Tools for Success – Surefront. https://www.surefront.com/blog/what-is-category-management.