WHY FOCUS ON CATEGORY MANAGEMENT
Updated: Apr 6
I remember when I started in procurement way back in the 1990's, before we knew what a spend cube was and before the tools we take for granted today were available. My first job in procurement as a procurement analyst for a large retail bank, A.T Kearney team members were there helping the organization establish it's very first procurement organization.
Back then there was a significant focus on doing structured strategic sourcing exercises for every selection process that was undertaken, all of which relied heavily on developing a solid understanding of what the current state internal landscape was, which substitutions were available, what bargaining power the organization had versus the suppliers in the field. All this was used to be able to produce a better RFP document, being able to negotiate better with participants and ensure all the right internal stakeholders were part of the RFP.
What I did not realize, at the time, was that we were essentially building a rock solid category overview and a strategy to execute on that strategy but simply masked as a procurement driven selection process.
Now, over twenty (ugh) years later procurement has become much broader in scope and size, we manage suppliers and their relative risks, we are responsible for transaction processing and invoice automation, we outsource entire departments, we manage working capital, we manage our organizations' contracts and we still send out the occasional RFx.
Now, more than ever, having a crystal clear understanding of all the constantly moving parts of our most important categories is critical. With rapidly changing external and internal landscapes it has become more important to keep and maintain category strategies to maintain alignment of our procurement strategies with the priorities of the business and to have a strategy that has the most current supplier landscape from which to make decisions.
I believe that procurement category management has fallen out of fashion due to the many conflicting priorities that procurement organizations have today, which is a shame given the importance of these plans.
Please let us know how you feel about category management as a procurement tool in the comments section below.