The Evolution of Category Management in Procurement

Noor  Al Rashedi
Category Management is pivotal to procurement success. Let’s take a look at how to reap the benefits on Mega- and Giga-Projects.

As the Middle East construction markets have matured, strategic procurement practices are becoming more embedded, especially in the larger global organisations. Ambitious economic diversification goals, and the drive for sustainable levels of development, presents the region with significant opportunities around procurement and supply chain integration. Here in KSA, Vision 2030 brings the challenge of high-volume infrastructure and megaprojects in an ambitious timeframe. Read more here about the way in which stronger, smarter procurement approaches will help the kingdom deliver.

Category management plays a vital part in strategic procurement—yet only a minority of global enterprises consistently leverage a category management framework in their routine operations. This means that a lot of potential value is lost, whether the organisation is seeking value in the form of cost, time or quality.

What is category management?

The Chartered Institute of Procurement & Supply (CIPS), which has a growing profile in the region, defines category management as “the entire art and science of supply chain management applied to a single category of expenditure.” It’s a way of organising procurement resources on specific areas of spend, with a focus on the supply market rather than internal customer functions.

What does successful category management look like?

Effective plans typically share some of these characteristics:

  • Strategic focus
  • Long-term view of the category strategy
  • Clearly defines the category portfolio and the synergies between sub-categories
  • Allows specialisation in terms of time and resources
  • Well-documented and clearly articulated category strategy
  • Proactive approach in influencing stakeholder behaviours and internal demand
  • Proactive pre-positioning of each category to take advantage of supply market shifts

How does it add value?

In our experience of successfully implementing category management strategies, our clients are benefiting from fact-based decision making, a sharper focus on costs at item level, greater efficiency across the supply chain, collaborative information sharing and planning, improved supplier service levels and performance, reduced supply chain risk, better return on investment, and opportunities to innovate. These outcomes offer significant improvements over traditional transactional based purchasing methods.

What next?

An exploration of category management is an integral part of the overall procurement initiative—for organisations embarking on a procurement improvement journey for the first time, as well as for more mature procurement departments revitalising their strategy.

These questions are useful in initiating the process:

  • What existing data do you have on spend and on supply market?
  • How can you best evaluate this data, in the light of your own wider organisational challenges and procurement issues, to leverage synergies and identify opportunities?
  • How can you best plan ahead? How will you create sourcing strategies and action plans, then monitor and manage them to meet the target ROI or desired deliverable?
  • Is your category strategy aligned to overall procurement and corporate strategy? Category management in context
  • Category management is one of eight steps that client organisations can utilise to add value at each stage of the procurement journey take a look at the other steps and find out about our free procurement maturity assessment model, here.
  • At Faithful+Gould, our professional procurement team leads the implementation of a clear, structured category management framework to achieve tangible value that enhances project/programme excellence. It’s vital to then measure the outcomes, and to capture and implement lessoned learned. We share our global best practice skills and proven methods with our clients, to enable them to formalise and thus transform their category management approach.

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