Category management vs strategic sourcing
The big differences between category management and strategic sourcing
Category management and strategic sourcing are two of the most common procurement approaches. Both approaches aim to drive efficiencies throughout the supply chain, whilst looking at opportunities within the market.
Category management
Category management involves segmenting the main areas of spend into groups of products and services according to their function. It requires organisations to work collaboratively on individual categories, examining the entire category spend, the marketplace and individual suppliers.
Strategic sourcing
Strategic sourcing involves the process of finding, evaluating, and choosing suppliers which meet the agreed organisation’s need. This strategy isn’t just about reducing the cost of products or services, it’s about driving efficiency within the supply chain in the long term.
Advantages of category management
Category management is increasingly being used in procurement and is no longer a process that is just used for retail. Here are some benefits of implementing category management within your organisation.
- Allows procurement professionals to focus on their time to conduct market analysis to fully leverage their negotiations
- Helps to correctly manage suppliers to align with corporate objectives
- Enhanced supplier relationships
- Gain an in depth understanding of how each category contributes to risk management through market analysis
- Enhances the customer experience as organisation’s will be able to focus on one category and look at promotions and product availability.
Disadvantages of category management
For category management to be successful, it relies on the good communication and collaboration with suppliers, which can sometimes be difficult. Here are some challenges you may face when implementing category management.
Advantages of strategic sourcing
Strategic sourcing enables you to source from the most capable suppliers, giving you an extra edge over your competitors. There are some additional benefits you’ll see by implementing strategic sourcing into your organisation.
- Strategic sourcing helps to develop a deeper understanding of a company’s requirements
- It will help you achieve and maintain a competitive advantage
- To achieve sustainable procurement, strategic sourcing can help
- Helps to sustain long term relationships with stakeholders and suppliers
- Considered to be an effective way to deliver sustainable cost savings
- Promotes healthy competition between suppliers
Disadvantages of strategic sourcing
Strategic sourcing is a continuous process, that requires a lot of decisions to be made on long-term value, not just the cost of the product. Here are some challenges that strategic sourcing could cause your organisation.
CIPS Category Management Cycle
Our Category Management Cycle will help you to define an efficient category management process.
Find out more about the Category Management Cycle
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