Category management is a structured methodology used by procurement leaders to deliver more value from their spending with suppliers. Successful category management requires clarity of vision combine with standardized process, modern tools and technology. In this article, we outlined a 4-step approach that covers category planning, sourcing and supplier management for delivering successful category management projects.
Step 1. Structure Category Management Procedure
The first crucial step in category management is to ensure that your category management procedure is structured. There must be a consistent process for each category with formal documentation. Key stakeholders in the category team review the reports and plans regularly, and then make decision on the basis of this information to set priority on resources and opportunities. Whenever possible, it is always important to align category plan to the corporate strategy to maximize value to the business. The category plan should be agile to adapt to changes in market conditions and business direction.
Step 2. Track Market and Category Risks
In order to succeed in supplier category management, it is important that you have a holistic perspective of your supply market. You need to have the ability to identify all potential suppliers of the category and have a systematic way to assess the potential market risks or category risks. These risks include both internal and external risks such as environment, geographical, political, resource, regulatory, commodity, labor, logistics, and infrastructure.
Step 3. Conduct Ongoing Supplier Risk Assessment
Once you have assessed the risks related to your supply markets and category, you will also need to evaluate the risks that are associated to each supplier. As a best practice, you should conduct an initial risk assessment as part of your strategic sourcing process. Ongoing risk management should be conducted on your top-tier suppliers, which helps avoid or minimize the chances of a supplier goes out of business without you being aware of it. Typical ongoing supplier assessment activities are frequent monitoring, monthly or quarterly meeting, and frequent updates on due diligence related information.
Step 4. Implement a Centralized Information Portal
Last but not least, you should implement a centralized information portal for the category management team to find and contribute relevant information easily. This promotes content standardization and reuse, and reduces the time spent in finding relevant information. It also serves as platform to provide clarity on the business case and deliverables or the category management team. A successful implementation of category-related knowledge tools enable the team to focus on content and connectivity, rather than on the execution of the process, and provide a single-point access to keep contracts, agreements, and other supplier-related document.
The first crucial step in category management is to ensure that your category management procedure is structured. There must be a consistent process for each category with formal documentation. Key stakeholders in the category team review the reports and plans regularly, and then make decision on the basis of this information to set priority on resources and opportunities. Whenever possible, it is always important to align category plan to the corporate strategy to maximize value to the business. The category plan should be agile to adapt to changes in market conditions and business direction.
Step 2. Track Market and Category Risks
In order to succeed in supplier category management, it is important that you have a holistic perspective of your supply market. You need to have the ability to identify all potential suppliers of the category and have a systematic way to assess the potential market risks or category risks. These risks include both internal and external risks such as environment, geographical, political, resource, regulatory, commodity, labor, logistics, and infrastructure.
Step 3. Conduct Ongoing Supplier Risk Assessment
Once you have assessed the risks related to your supply markets and category, you will also need to evaluate the risks that are associated to each supplier. As a best practice, you should conduct an initial risk assessment as part of your strategic sourcing process. Ongoing risk management should be conducted on your top-tier suppliers, which helps avoid or minimize the chances of a supplier goes out of business without you being aware of it. Typical ongoing supplier assessment activities are frequent monitoring, monthly or quarterly meeting, and frequent updates on due diligence related information.
Step 4. Implement a Centralized Information Portal
Last but not least, you should implement a centralized information portal for the category management team to find and contribute relevant information easily. This promotes content standardization and reuse, and reduces the time spent in finding relevant information. It also serves as platform to provide clarity on the business case and deliverables or the category management team. A successful implementation of category-related knowledge tools enable the team to focus on content and connectivity, rather than on the execution of the process, and provide a single-point access to keep contracts, agreements, and other supplier-related document.
