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Category Management ProcurementThe Ultimate Guide of 2023

Category management procurement seems to be a new term for beginners in the procurement industry. It may seem a topic that is tough to tackle. But hey, we are here for you to guide you every step of the way.

For this article, we will discuss category management procurement. We will study how it works and how it is used in the business. 

After you read this article, you will be able to utilize this strategy in your business. This will allow you to effectively plan your business direction and stay focused on your objectives. Let’s now start to wander the world of category management procurement. 

What is Category Management Procurement?

Category management procurement is a strategy wherein the overall spending of a business is segmented by a similar type of product. 

This strategy allows category managers to concentrate and gain a deeper knowledge of the products, suppliers, and markets. Through this, category management procurement develops a strategic plan that aligns with its objectives.

Category management procurement is about bundling items at its basic level. Bundling items in each category in the market allows the procurement team to save some money by allocating their purchases within fixed parameters. 

It also enables companies to buy at cheaper prices which create a competitive advantage in the market. The segmentations in category management procurement arrange goods and services in groups based on their function and types. 

Listed below are some of the categories in which the organization typically focuses their expense:

  • IT
  • Security
  • Office management
  • Human Resources
  • Professional Services
  • Medical
  • Industrial products and services
  • Transport


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Importanceof Category Management Procurement

Category management goes beyond purchasing goods and services. It guides the strategy of a business to develop and build a relationship with the supplier. This allows the business to create a deeper understanding of negotiations and program development. 

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Going back, category management builds a stable connection between you and the supplier. It balances the relationship between the clients and vendors as it relies heavily on open communication and honest negotiation. This allows you and the supplier to come to a compromise where both of you can achieve a positive resolution. 

Elements of a Strong Category Management

1. Internal Assessment

Internal assessment of the company’s needs should be the baseline for category management and provide a basic understanding of major suppliers, sub-categories, key requirements, internal policies, and challenges that the business experience. 

Internal needs assessment is particularly useful when you review your category management strategy with someone who is unfamiliar with its scope. 

2. Spend Analysis

A strong category management strategy depends upon a solid understanding of historical and forecasted spend. 

Without accurate available information, it is hard to imagine how you can formulate a strategy that you are confident will work. 

If you have not done anything in developing a category management strategy, you should at least try to conduct a thorough spending analysis before making any recommendations to stakeholders. 

Additionally, you must know how to visualize your data by transforming it into an eye-opening story that will enable you to show the stakeholders powerful business insights. 

3. Category Segmentation

Category segmentation will help you to effectively apply the appropriate strategic category management for the materials and services you are sourcing and help you prioritize where you should spend your time. 

For category segmentation, you can use the Kraljic matrix that will help you evaluate key factors for your category management plan. 

4. Strategy

All the elements that we discussed earlier should allow you to articulate high-level strategies that will guide all procurement activity of the business. You should also take note to include your goals and KPIs to help measure the effectiveness of your strategy. 

5. Category Plan

Now that you have made a strong category management strategy with ambitious yet attainable goals, then the one thing you should do is the execution that will deliver your desired results. 

The category management plan should call out the name, description, tactic to be used, value, strategy alignment, and timing of the project.

Benefitsof Category management Procurement

1. Increase in performance of vendors

Category Management helps big and small businesses to work with vendors efficiently and secures the time between the start and end of their process. It also helps the business to gain a deeper knowledge of each vendor. 

2. Build a better relationship with different suppliers

Category management creates an opportunity to make contacts within the structure of the business. This allows the business to delegate tasks effectively at the functional level. Thus, creating better communication that aids in building a better relationship between its diverse suppliers. 

3. Provides better Insight regarding spending and negotiating

Category management helps maintain the category of products which provides crucial insights into the accuracy of price, cost, and spending. It also identifies the full list of vendors that makes the complete expenditure known by the business. 

4. Implements purchase to pay process

Dealing with suppliers is a tiring task, especially if you use different processes for each supplier. Category management enables the process of dealing with a supplier in a specific category to be done perfectly. 

This allows the business to replicate the process they do from a specific category of a supplier to another supplier. Therefore, streamline the process of dealing with your suppliers. 

The roleof Category Manager

You may wonder who handles the category management procurement. This is where the category manager comes in. A category manager handles a certain category of goods and services. It is the one who manages and develops strategic plans, and category plans, and provides insight into the category of products. 

Category managers manage supply chain relationships for their specific roles. This requires category managers to have a background on the specific category that they will be assigned. 

Category managers should be an expert in their specific category. Additionally, they must have the skills to be one. The following are some of the skills that a category manager should have:

  • Should have a deep understanding of spend, demand, providers, and markets. 
  • Hard analytical skills
  • Ability to implement a strategic plan that is aligned with the objectives and goals of the business.
  • Communication and negotiation skills for the benefit of internal and external stakeholders. 

DifferenceBetween Category Management and Strategic Sourcing

We now know that category management is a strategic approach to procurement to segment the spending of a business into similar products. Although it is a strategic approach, it must not be confused with strategic sourcing. Below are some of the differences between category management and strategic sourcing:

Category Management
The spend analysis in category management is continually refreshed.
It has an end-to-end process
It includes supplier management programs
One of its key components is supplier development due to its process.
Strategic Sourcing
The spend analysis is conducted for quick requirements
One-time process
It sometimes lacks the aspects of supplier and contract management
Commonly, it has no supplier development programs.

Frequentlyasked questions

+ What is category management procurement?

A category management procurement streamlines the process by segmenting similar products in a business.

+ What does a category manager do?

Category managers facilitate and handle the entirety of category management procurement.

+ How much does a category manager make?

The median salary of a category manager is around $100,000 per year according to LinkedIn. Although salary depends on the country you live in.

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