Category Management, as Explained by Lobster

If you've watched TV in the past week, you've probably seen a lobster promotion at every sit-down chain restaurant under the sun. Outback Steakhouse and Ruby Tuesday suddenly have cheap lobster, and in Philadelphia, near Source One, all the seafood restaurants -- even the hoity-toity ones -- are running lobster specials. It just so happens that lobster prices in North America hit record lows in October of 2013, which is when lobster is at its most plentiful. Low prices + abundant supply = buyers springing into action, aggressively. Hence, steak and a lobster tail for $15. This is part of category management -- having such in-depth knowledge and oversight over a particular category that you can foresee changes in the market and capitalize on trends and dips.

Restaurants are some of the best at monitoring the markets and buying when prices are right -- see this article about how McDonald's McRib only shows up when pork prices are way down -- but the practice can carry over into any purchasing department, including yours. So, how can you hone your category management skills to take advantage of pricing changes?

1. Know the Category

Knowing the category, and the products within it, is the most critical part of buying at the right time. Understanding how the goods are priced -- if there's an index involved, if their prices are affected by speculators or other market factors, and if there's any seasonality to the particular market.

2. Work with Suppliers

If you lack knowledge of the product and category, you can likely glean some knowledge from suppliers. In a category like IT, where product lines and specific SKUs have definitive lifecycles and a competitive marketplace, a good supplier relationship can get you the inside information you need.

Need to upgrade 200 monitors? HP is running a promotion in two weeks, but if you need printers, Model X is deeply discounted as they clear out stock.

This kind of in-depth relationship with a supplier takes work, but once an open and healthy communication stream is established, it can pay benefits. This goes far beyond an approved supplier with a web portal.

3. Be Flexible

The same mentality that allows travelers with a rubber schedule to capitalize on deeply discounted last-minute air fares can allow you to take advantage of good pricing. Look at your supply chain for a minute - do you have excess warehouse space? Can you accommodate/use a similar product if a functionally similar good is priced exceptionally well compared to the desired product? A bit of corporate flexibility can pay dividends when its time to take advantage of a low price.

So while these takeaways are part of what's needed to effectively manage a category and leveraging that management for additional cost savings, they're not the whole package. If you have questions, we're here.