You may have come across the term ‘category management’. Most of us are not aware of what it means. With category management, organizations can drive their value, growth, and innovation. A large number of companies cannot handle the transition from strategic sourcing to effective category management. Modern-day organizations hire sourcing freelancers for blending their procurement strategy with category management.
Relationship Between Strategic Sourcing and Category Management
No doubt, if the firms implement their sourcing strategies effectively, it will facilitate their long-term goals. But, there is a gap in the process of “hand-over” from strategic procuring teams to transition the contracts relating to the category management function. The category managers have to understand the profits and concessions of the negotiations phase. It is not the end. The category managers have to build positive relationships with the suppliers.
What is Category Management?
Category management is a way of boosting value for an organization that encompasses the idea of strategic sourcing. According to experts, category management is a rigorous, fact-based, and end-to-end process. Category management enables organizations to collaborate proactively with stakeholders. In this perfectly competitive market scenario, organizations seek growth and innovation in every aspect of their operations.
Benefits of Category Management Processes
The advantages of category management processes are listed as follows:
- Accelerating the effectiveness of the sourcing function within the company.
- Cost-effective approach resulting in significant savings. According to research, competent procurement functions can minimize 10-30 percent of an organization’s cost structure.
- The fewer number of risks in the supply chain processes. The sourcing subcontractors help organizations to build constructive relationships with the suppliers.
- With the help of category management experts, organizations can improve their relationships with their stakeholders.
- Improvements in service standards, quality, availability, and value.
- The revelation of alternative sources of value and innovation from the supply base.
How Strategic Sourcing and Category Management Form a Virtuous Cycle
Effecient category management techniques facilitate an effective and seamless transition of business processes. Some other best practices are listed as follows:
- Formulate the logical categories for businesses by bringing products and services of similar features under the same roof.
- Assessing the plans and business strategies of organizations so that the policymakers are assured the categories are in line with the business goals.
- Organizations must develop category benchmarks that will enable them to identify additional improvement opportunities. More often, companies hire sourcing freelancers for exploring the underlying opportunities.
- Making use of big data and business analytics is a good way to scrutinize an organization’s spending (direct and indirect), market data, and productivity against benchmarks.
- Constant analysis of the pricing standards based on the national and international markets.
- Companies should invest in the process of gathering information relating to supplier performance data.
Category management is intricately related to the sourcing strategy of organizations. The sourcing subcontractors play a major role in this regard. Blend your organization’s procurement policy with effective category management techniques for maximum gains.
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