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How to apply the category management cycle?

Take a look at the category management cycle in action and how to implement it

How do you implement category management?

A useful tool that will help you implement category management is to use our Category Management Cycle. The model is a four-phase process, with six key activity steps so you can successfully procure significant categories of spend. You can apply certain elements of the model when you don’t need to follow the full process.

CIPS Category Management Cycle

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Category management cycle in action

The category management cycle will help you to define an efficient category management process. This process is not set in stone and not all stages will always be relevant to all categories and all organisations. However, what this does do is provide you with a starting point and guidance to help devise an efficient category management process for procurement.

Download the PDF cycle

1. Define Categories

Initiate / Prepare

Name the categories and decide what products or services procurement will manage within each.

Key Questions

What is the scope of the category?
Who are the key stakeholders?
What key issues or problems need to be addressed, are you aware of the business objectives you need to consider?
Do we have support for this work?
Do we have the resources and skills to undertake the work?
Are we clear about the high-level benefits and risks?

Checklist - to do

Initiate project (if required)
Define initial scope and objectives
Engage stakeholders and gain support
Identify and secure resources and access to specialist skills
Form cross-functional team
Map stakeholders and create stakeholder management plan
Build a project timeline

Create communication plan
Define data/information and knowledge management requirements
Define roles and responsibilities (RACI)
Confirm initial scope, potential benefits and risks
Conduct a formal ‘stop and think’ before proceeding e.g. gate review with senior business stakeholders

Extra information to consider for this step

Category Management
Category Management Strategy
Stakeholder Management

Risk Management
Risk Mitigation
Team Competency Assessment

2A. Create Category Visions

Identifying Opportunities

Establish a vision for the category which is aligned to the corporate vision.

Key Questions

Do we understand our business needs and issues (now and into the future as far as possible)?
Do we have a deep understanding of the external marketplace, its trends and dynamics, and an appreciation of our organisation’s position within this?
What opportunity for improvement can be gained by commercial and economic insight?
Are the any quick-win opportunities that emerge through our immediate research and analysis? Can we implement these before developing a final strategy?

Checklist - to do

Research

Define scope and purpose and source(s) of research. Agree roles and responsibilities

Conduct research and data gathering for:

Product
Portfolio
Supply market. Undertake RFI if needed.

Relationship history
Conduct internal stakeholder needs analysis and determine strategic business priorities

Analysis

Derive competitive insight – Porters 5 Forces / Capacity and Demand Analysis/Switching costs/ SWOT analysis/ Pricing Behaviour/ Industry Competitiveness
Derive economic insight – value chain mapping/costs structures/cost modelling/margin analysis. Life-cycle costing

Understand supplier capability and preferencing
Determine category sourcing characteristics
Understand the corporate responsibility

2B. Set Category Objectives

Prioritising Opportunities

Decide and document what objectives need to be met to achieve each category's vision.

Key Questions

What are the changes and opportunities that will drive improved performance
What risks need to be addressed?
What priorities make sense for the business?

Checklist - to do

Screen and prioritise opportunities
Identify potential suppliers
Determine desired relationship type and segmentation approach
Qualify suppliers
Conduct impact assessment (include corporate responsibility and CSR/sustainability factors i.e. social, economic and environmental impacts
Assess the capability of the internal procurement process to deliver suggested changes
Share proposed opportunities with significant stakeholders

Screen and prioritise opportunities
Identify potential suppliers
Determine desired relationship type and segmentation approach
Qualify suppliers
Conduct impact assessment (include corporate responsibility and CSR/sustainability factors i.e. social, economic and environmental impacts
Assess the capability of the internal procurement process to deliver suggested changes
Share proposed opportunities with significant stakeholders

3. Define Category Strategies

Prepare/Present Category Strategy

Agree the strategies that need to be implemented to meet the categories' objectives.

Key Questions

Is the strategy grounded and are the recommendations supported by the research and analysis?
What is the payback (benefit), how will it be measured and is it realistic and tangible?

Does the expected benefit stack up in relation to the anticipated risks and the resources required to deliver them?
Does the strategy address the business issues and objectives identified at the outset?

Checklist - to do

Develop sourcing strategy/route to market and other recommended changes
Quantify expected benefits
Define resource and costs implications
Quantify risk and develop mitigation plans
Prepare detailed implementation plan

Define relationship management and governance structures
Confirm segmentation approach, relationship profiles and roles
Confirm transaction process
Conduct a formal ‘stop and think’ before proceeding e.g. gate review with senior business stakeholders

4. IMPLEMENT CATEGORY STRATEGIES

Implement Category Strategy / Change Recommendations

Roll out the strategies and achieve buy-in.

Key Questions

Is the implementation and change programme being communicated effectively
Is implementation proceeding as outlined in the strategy?
Are relationships and supporting structures in place?
Are performance measurement/reporting systems established?

Are benefits secured and captured?
Are transition risks being effectively managed?
Are stakeholders satisfied?

Checklist - to do

Create service/specification and requirements
Conduct market enquiry (RFI/RFQ/Pitch)
Analyse responses
Select preferred suppliers
Negotiate
Select supplier
Contract with supplier

Mobilise other strategy change initiatives
Measure and communicate progress
Manage transition risk
Initiate relationship management process
Deliver training for new/changed resources/systems/processes
Apply supplier segmentation rules

5. MEASURE & MONITOR STRATEGIES

Maintain

Performance manage the progress of the strategies using KPIs or SLAs.

Key Questions

Are we managing supplier and internal stakeholder relationships effectively
Have we identified and managed risks?
Is the strategy delivering the expected benefits?
Is performance monitored
Are issues effectively managed and resolved?

Are we managing supplier and internal stakeholder relationships effectively
Have we identified and managed risks?
Is the strategy delivering the expected benefits?
Is performance monitored
Are issues effectively managed and resolved?

Checklist - to do

Manage and evaluate internal relationships
Manage performance; non-conformance events, problem resolution, learning
Manage supplier contract
Manage supplier contract variation and changes
Manage supplier contract termination

Measure and review performance
Communicate with stakeholders and suppliers
Manage ongoing risk and continuity planning
Manage transactions (fulfilment); demand notification, aggregation, forward demand planning, supplier allocation and payment
Apply audit and controls

6. REVIEW CATEGORIES

Improve and Enhance

Establish if the categories are still relevant? Do any amendments or additions need to be made?

Key Questions

Do we have mechanisms which identify and seek to deliver continuous improvements?
Do we have the right internal and external behaviours and structures to generate and deliver change and innovation?

Are we aware of internal and external changes and routinely assess how they might present risk or opportunity?
Is the category strategy still aligned to the needs and priorities of the organisation?

Checklist - to do

Identify improvement opportunities
Deliver continuous improvement actions; benchmarking, problem analysis, competitor analysis, supplier networking and development
Capture/share learning and knowledge
Consider internal/external events which change, challenge, provide opportunity or risk procurement deliverables

Continue to align strategy and business needs (e.g. through the planning process)
Communicate progress in delivering strategy and benefits
Conduct formal ‘stop and think’ to re-affirm strategy effectiveness or as a result of a major internal or external trigger event

Category management key themes

descriptionCategory management
descriptionCategory management strategy
descriptionBenefits
descriptionDifferences with strategic sourcing

descriptionCategory management
descriptionCategory management strategy
descriptionBenefits
descriptionDifferences with strategic sourcing

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