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Category Management Cycle

What is the Category Management Cycle?

The CIPS Category Management model is a 4-phase process with six key activity steps to successfully procure significant categories of spend. You can apply elements of the model when you don’t need to follow the full process.

Category Management should not be confused with expenditure segmentation. It is a structured framework of activities designed to deliver superior procurement outcomes. The cycle can help you to define a category management process.

Download the cycle to use in presentations and share with peers on social media.

Download the additional CIPS category management tools to help segment spend and create opportunities.

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Initiate 1 Prepare 2a Prioritise 2b Define 3 Implement 4 Maintain 5 Improve 6
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

Download the Full Category Management Checklist

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

Download the Full Category Management Checklist

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

Download the Full Category Management Checklist

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

Download the Full Category Management Checklist

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

Download the Full Category Management Checklist

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?

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

Download the Full Category Management Checklist

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

Download the Full Category Management Checklist

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