As Jonathan Webb, Head of Advisory at Procurement Leaders, noted in Forbes, “At its most basic level, category management is about bundling items” (Webb 2015). Category management is a strategic approach to procurement that may differ from business to business but will generally involve segmenting spending into areas that contain related products. This allows businesses to focus, consolidate and find the most efficient solutions, relationships and agreements.
The segmentation and classification of categories is incredibly important for global organizations with large spend volumes. This discipline can be applied to enhance spend management/analysis, strategic sourcing, supplier onboarding (segmentation, screening, and governance), supplier relationship management, negotiation, performance management and for opportunity identification to create mutual value with suppliers.
On top of all the above, category-led procurement & sourcing provides a sure-fire framework to save time, money and resources.
In this blog, we’ll highlight how improved category management software can positively impact various procurement processes that are central to procurement success.
Valuable Insights
Category management platforms can help to facilitate a more nuanced and in-depth understanding of your category spend and your negotiations. Data analysis is an extremely useful tool that can provide you with actionable insights.
With these types of software you will be able to configure your supplier data in a variety of ways so that you can get a full picture of your supplier base and understand where you can start making gains, and where you can start cutting ties.
In general, category management solutions will provide insights that will enable you to:
- Identify potential disruptions to your supply chain and formulate contingency plans
- Manage vendors and categories in way that is in line with your profitability, risk management and performance goals
- Go into negotiations with comprehensive and accurate information. This in turn will enable you to leverage economies of scale and secure the best pricing and terms. Read more on 5 Benefits of Using Supplier Information Management Software
It’s a fine line really… Your supply chain can be the key to sustained success, or it can become a place of risk and inconvenience. A modern category management solution can make all the difference.
1. Enhance Supplier Relationships and Performance
Beyond data management and analysis, category management tools can help organizations with their supplier performance and relationships.
Kodiak Hub’s platform is a great place to start if you are looking to improve your supplier relationships. Our modular suite of supplier relationship management solutions include sophisticated category management tools to ensure you are always able to maximize the potential of your buyer-supplier relationships.
With such software it is easy for teams to come up with an agile and timely category plan that:
- Considers how to recruit, evaluate and onboard new suppliers as efficiently as possible.
- Provides a way to collaborate and communicate with suppliers that is personalized by category/segment and creates opportunities for shared growth.
- Shows organizations exactly how their suppliers are performing so that decisions can be made towards replacing or upgrading suppliers. Learn more about 9 Benefits With Supplier Performance Management Software.
2. Greater Savings
Category management software systems can help organizations save money on materials, supplies and inventory. By streamlining procurement processes it’s easy to see vendor contracts and understand where you could be making marginal gains.
“Category management [software] can go a long way towards helping you manage supply chain risk”(101). With enhanced category management systems you can pinpoint irregular spending, identify areas where you can make adjustments and start cutting costs.
Some leading Spend management softwares out there that you should keep an eye on are Spendency, Sievo, SpendHQ, Coupa, and many more.
Whether you are purchasing stationary for the office or rejigging your inventory, spend management software is the ideal way to quickly get a grasp of a spend category and find the best buying opportunities without any hassle.
3. Increased Focused on Collaboration and Innovation
Category management platforms makes it easy to initiate and manage collaboration with various suppliers. Soft skills such as negotiation, conflict resolution and relationship management are all made easier with software which places an emphasis on building sustainable supplier relationships.
With category management platforms, organizations can save time on processing and fast-forward through the boring parts of the job. Now employees can turn their focus to finding creative solutions, seeking out interesting suppliers and getting closer to innovative, market leaders. Dig deeper about this topic in the article 4 Must Knows To Increase Supplier Innovation & Collaboration.
4. Efficient Use of Resources
Reduce waste. When it comes to procurement and supplier relationships the last thing you want is to use your resources unnecessarily. Category management solutions helps to ensure organizations can make efficient use of their resources throughout all of their supplier relationships. It will help to ensure employees do not waste their time trying to configure their own category management strategies. Instead, they will have the freedom to focus on their core responsibilities and they will have more time to focus on development opportunities.
Industries Seeing Success with Category Management Software
For large companies with a significant supplier base across industries such as construction materials, manufacturing, foodstuff, textile, software, chemicals or mining, category management is integral to good tactical purchasing and strategic sourcing. We've also seen that companies with a smaller, but more complex supplier base - a software solution for category management becomes imperative to manage day-to-day tasks and staying on the right path for future success.
Now you know more about the many faces of category management, you too can start making strategic and informed procurement decisions.
Kodiak Hub’s Supplier Relationship Management (SRM) platform can help you build a responsive and robust supply chain that is always improving. Using Kodiak Hub will ensure that you can build sustainable supplier relationships and make the most of your strategic approach to procurement.
It’s time to up your category management game!
