Challenges in category management. How to do it right?
Successful procurement requires more than selecting qualified suppliers and negotiating contracts. Strategic category management is the supreme discipline of strategic procurement. Maintaining desired added value and controlling costs is at the top of the priority list. This sounds simple but is fraught with more challenges and stumbling blocks than many expect.
Stumbling blocks in category management:
- The right choice of categories
- Lack of qualifications and tools for ongoing category management
- lack of resources for implementation, e.g. for contract adjustments
- Follow-up of the service provided to the agreed service is not sufficient, including the agreed milestones
- Missing key figures and metrics in procurement
- Insufficient transparency in the data on services and materials
- Insufficient implementation of compliance guidelines by the contracting parties
- Lack of internal interface management
- Low internal and external customer orientation for optimization
Creating a basis
Any process is only as good as the data and information provided: Shit in, shit out. It is therefore important to ensure the appropriate data quality at the point of capture in order to generate information and then knowledge from data. A proper purchasing controlling and risk management is also based on this data and can only be as good as this data. Category strategies for the short, medium and long term are to be developed based on the knowledge gained about the category and adjusted if necessary
If the data is correct, there is not much in the way of a good process. The processes in procurement, from data collection to implementation support, must be analyzed and then tailored to the needs and possibilities of the organization. The result of the analysis shows whether the tools already in use are sufficient or whether supplementary digital solutions are useful. The aim is not to digitalize under all circumstances, but to make processes better and more secure. A long-term, sustainable and value-added product group management for the organization is the objective.
The supreme discipline: strategic merchandise category management
This is where many important procurement processes converge, and extensive expertise is required to implement them. In addition to costs, the Category strategy usually focuses on quality and innovation.
Cross-functional cooperation throughout the entire supply chain is a key success factor. An optimal result can only be achieved through close cooperation between procurement and other functions involved, such as production, development or QM as well as other demanders from within the company and the involvement of management.
There is probably no management level that has anything against a holistic optimization and simultaneous cost reduction as a value contribution to the company’s success, is there?
Consultant, ADCONIA GmbH