Part I of our series on Category Management (CM) defined CM and described how its application in procurement differs from its application in retail. Parts II and III of the series delve into what type of players you’ll need on your CM team and how to get a CM program off the ground. CM is a detailed process that requires a special mix of people and resources to perform correctly. It takes hard work, time, and consistency. So why use CM?
The answer is complex. CM strategies can deliver to a wealth of benefits to your business. Here’s a list of just a few:
Better Spend VisibilityProbably the most immediate and obvious benefit to a CM initiative is a heightened sense of spend visibility. When you take a close look at every cent of spend within a category, there's far less chance you'll overlooking a hidden costs or accept an unnecessary fee from a supplier. You can get a better understanding of how much it actually costs to source your essential products and materials. Better insight into spending will continuously deliver results to your supply chain and provide for better decision making.
Increased Vendor VisibilityIn learning more about each spend category, a company is bound to learn more about its supply base. Companies can use their CM program as an opportunity to gain an in-depth understanding of each vendor. With greater vendor visibility, you can assess the operational risk of each supplier more efficiently and negotiate contracts from a more strategic position. Learning more about what each supplier has to offer also generates more opportunities for consolidation. If a category manager can offer a single supplier a larger scope of work, they save time and identify new opportunities for value generation.
Stronger Supplier RelationshipsIntroducing a CM system will push your team to have more contact with vendors. Category managers will need to establish consistent and effective communications to ensure relationships remain mutually beneficial in the long term. A good supplier will want you to have as much visibility into the material as they do. Additionally, suppliers will feel better about partnering with organizations that have taken a genuine interest in their processes and put in the effort to build a relationship.
Heightened Client SatisfactionWith better awareness of the market, your company will be able to better gauge which areas it excels in and which ones could use more attention. Are customers satisfied? Is there an area untouched that your company can better address? When you fully grasp the ins and outs of sourcing within a category, you’ll have a better sense of how you can make your products and services better.
Implementing a category management initiative isn’t easy, but the benefits far outweigh the costs. You’ll find a CM program can help clear the fog on your entire supply chain.
It’s never a bad option to utilize a third-party to help you along with the category management process. Bringing in expert category managers could help to see your spending from an outside perspective and identify spending patterns you wouldn’t otherwise recognize. For more best practices on category management, check out the previous installments in this series.