Rediscover the basics, says Paul Jackson
Category management is a hot topic in strategic procurement circles, according to CIPS trainer Paul Jackson. Long used for high risk, high value products, businesses are now turning to the ideology to consolidate spend in lower value categories, cut costs, improve supplier relationships and other values such as sustainability. To help secure all the possible benefits, use his rainbow aide-memoire to focus on category management’s basic principles:
Reduced costs and consolidation
These should focus on total cost rather than upfront costs, recognising efficient and effective use of goods and services, resources, fluctuations in demand, market prices etc. The ability to forecast and predict the category, and factors relating to it are essential.
Category management offers many internal benefits, such as improving bottom line profitability and stakeholder satisfaction. Better understanding of contracts, risk, suppliers and the business’s own commercial status also helps to underpin its future operation and sales initiatives.
You and the team
Encourage opportunities for the team’s skills and personal development to migrate both within the function as well as through the wider organisation.
Today, management of the environment, waste and use of resources is paramount to the success of an organisation. Category management offers an opportunity to check that sources are sustainable, emissions minimised and waste recycled.
Buyer for the customer
To help grow sales and profits, maintain a clear appreciation of internal and external customer requirements for products, services, demand and quality, and understand the customer’s budget and lead time aspirations. It is important to be as aware of products that are not supplied as those that are.
Product and service requirements
As well as having a detailed focus of goods and services at a technical, quality and operational level, category management should study service, maintenance and warranty provisions and explore opportunities to improve value for money and efficiency, and widen the portfolio of offerings.
Innovation and technology
Collect and analyse data – from all kinds of sources – to drive commercial, supplier, customer and market advantage through the category and onto the business’s bottom line.
Category management argues for fewer suppliers, focused and strategically aligned to give customers a better service. So it is vital to nurture and capitalise on the heart and soul of these relationships.
Paul Jackson is a CIPS trainer, and managing director of Profit through Change