Has category management had its day?

8 April 2019

At a recent presentation to CPOs of global organisations I was asked, “Has category management had its day, and if so, what is the new thing that will replace it?”

This question took me back a bit, as if suggesting something like gravity is dead and the future is floating! Yet it did make me think about how category management, and crucially how we interpret and apply it, is changing.

Category management is not going anywhere. The idea of strategically determining the optimum sourcing strategy for fully aggregated areas of spend in a given organisation, according to how marketplaces are organised, is based upon core economic, business improvement, and change management principles. It provides essential, underpinning theory for any procurement practitioner. Beware the company suggesting otherwise, perhaps as a prelude to introducing you to their new procurement solution, as the need for highly skilled experts in category management to transform organisations has never been greater.  

Future category management will transcend the traditional cost-out demands, due to progressive organisations now demanding new value from their supply base, with cost-out or price-down not always being top of the list. Instead, securing supply, de-risking but capturing innovation from the supply base, or achieving competitive advantage by better responsiveness, will be prioritised. This is all driven by our changing global marketplace and 21st century consumer demands and expectations. ‘Better, faster, cheaper’ has become, ‘better, when I need it, and uniquely tailored for me’.

The current digital revolution will engulf category management into a future generation of digital systems and tools. Today, despite what suppliers tell us, organisations are buying islands of technology to better enable procurement and the wider organisation, each addressing a specific need but with little integration with external ‘big data’ around markets, suppliers, customers, demand and world events. Future systems will take us a step further and category management will become embedded within the algorithms that power these systems, thus demanding a new generation of procurement experts. These systems will automate routine spend and connect with giant Amazon-like marketplaces. There will be little need for traditional buyers, but an increased need for highly talented category managers who are also digital and data savvy.

Today, category management tends to focus on finding the optimum strategic sourcing approach for areas of spend, yet this will shift with the need to consider the entire supply chain. Procurement and supply chain functions will merge, and where and how goods are created, or how services are performed, is fast becoming as much of the story and category strategy as the category itself, and will be driven by new expectations around corporate social responsibility.

Category management will play an increasing role in helping organisations realise competitive advantage to survive and stand out in our future world. How this happens is set to feel very different to what we see today, with a new generation of procurement practitioners piloting new digital platforms to help realise this.  

☛ Jonathan O’Brien is author of Category Management in Purchasing, the fourth edition of which has just been published.

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