How to Implement a Category Management Approach

Category Management is a critical function in strategic supply management organizations. It develops and executes strategies for categories of goods or services, aligning internal business requirements to supply capabilities.

While many organizations recognize the need for a category management approach, they sometimes don’t understand the detailed processes and steps involved in developing and executing successful business-driven category strategies.

The recently released CAPS whitepaper, A Playbook for Category Management, is a guide for working cross-functionally with stakeholders to develop and execute business-aligned category strategies. It dives into benefits of and reasons for implementation, and includes a framework of key steps, activities, and tools required for category management.

Benefits of Category Management

According to the whitepaper, key objectives of category management are aggregating spend for leverage or negotiations, reducing the total cost of ownership, and reducing risk. Tellingly, when asked to rate the importance of different factors that motivated their companies to move towards a category management approach, executives said their top three reasons are that it creates value for the business, reduces procurement costs, and reduces supply chain risk.

What’s in Your Category Strategy Playbook?

 In general, a category management playbook should include the following steps:

• Preparation
• Internal analysis
• External analysis
• Category strategy and development
• Negotiation and contracting
• Supplier relationship management
• Performance measurement and continuous improvement

While a playbook is a necessary tool for successful category management, there are other factors necessary for success which include:

• Alignment with business drivers
• Training of a category team
• Top management support
• Successful engagement with relevant stakeholders
• Documented category management processes outlining the stage, activities, and tools
• Establishing accountability for category strategies and their successful execution

Looking for more?

CAPS members can access the full playbook now, including a detailed category management framework and tools in the CAPS Library now.

Check back for future blog posts in our category management series, which will include a detailed overview of each step of the category management playbook, including tools, techniques and best practices you can put to work in your organization.  

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CAPS Research