Category management is a fundamental concept for businesses operating in the retail sector, particularly those managing a diverse array of items. It serves as a strategic technique for companies to streamline their purchasing processes and achieve significant cost savings in procurement. But what exactly does category management entail in simpler terms?
What is category management?
At its core, category management involves bundling items into different categories. This bundling process, also known as assortment planning, allows companies to group similar items under a single deal. The “management” aspect refers to the procurement methods employed to ensure that the company maximizes its savings. Simplifying demand and negotiating larger contracts are key drivers behind effective category management.
According to the procurement experts at SpendEdge, “Strategic category management involves the process of developing a clear understanding of the organization’s core values and key objectives.”
Now, let’s discover the top benefits of category management that can help your business to grow.
Category management benefits
Healthier performance of suppliers
Category management is the process of consolidating similar items into a single contract, thereby simplifying procurement. A well-executed category management plan can enhance collaboration with suppliers, expedite the procurement process, and ultimately drive value-based services to meet client needs.
Greater client satisfaction
Effective category management facilitates communication and relationship-building within the organization and with suppliers. Coordination at the highest levels of the organization ensures that specific tasks are delegated appropriately, fostering improved supplier relationships and streamlined operations.
Better supplier relationships
In instances where a category is not clearly owned or managed, insights into expenditure accuracy may be lacking. Without proper oversight, the full extent of spending and the list of suppliers remain unknown, hindering effective financial management.
Better insights into spending
Usually, when a category is not owned by anyone, there is hardly anyone who can provide the required insights into the accuracy of expenditure because no one is acquainted with the contracts that are on the way. The full list of suppliers is unknown, and hence, the complete extent of spending is unknown too. It can facilitate the better understanding of spending on the existing as well as upcoming contracts.
Thus, category management can be defined as a process that runs parallelly and forms the base that can lead to the success of initiatives for strategic sourcing. But this is only possible when it is done efficiently and with all the required attention. It is required by the company to take effective steps to lay development and training program to improve skills for competent management of category.
In summary, category management is a parallel process that forms the foundation for successful strategic sourcing initiatives. However, achieving optimal results requires efficient execution and dedicated attention. Companies must invest in development and training programs to enhance the skills necessary for competent category management.
By incorporating category management principles into their operations, businesses can optimize their supply chain, improve procurement efficiency, and ultimately drive greater value for both themselves and their customers.
To explore more about the benefits of category management