Category Management Helps a Food and Beverage Firm Achieve Significant Cost Savings by Proactively Managing the Procurement Expenditure
Five Key Enablers of Successful Category Management Players across industries are increasingly turning to category management to increase their brand awareness and its impact on business growth. But that’s not all- the benefits offered by category management extend beyond this making it a powerful lever that drives strategic value and growth. Today, procurement category management […]
Five Key Enablers of Successful Category Management
Players across industries are increasingly turning to category management to increase their brand awareness and its impact on business growth. But that’s not all- the benefits offered by category management extend beyond this making it a powerful lever that drives strategic value and growth. Today, procurement category management is on the cusp of change and the legacy of it is the value it delivers to procurement. Here are the key enablers of a successful category management strategy:
Cross-functional Approach: A robust category management process requires a business-wide, cross-functional approach wherein several factors are assessed to determine and implement new breakthrough sourcing strategies.
Executive Mandate: Category management requires a clear executive mandate. It involves challenging what has gone before and exploring new ways to satisfy business needs.
Performance Management: It is essential to ensure you measure the right metrics as the category management process can be derailed if incorrect metrics are used to drive behaviors that don’t abide by the business goals.
Robust Governance: Robust governance here implies the necessary arrangements for governing the category management process and to ensure its effectiveness in the organization.
Spend Analysis: To develop a basic governance framework for the process one needs to have a fundamental understanding of their purchasing and spend patterns.
About the Client
The client- a well-known player in the food and beverage market in the US.
Food and beverage companies are facing increasing pressure to reduce costs in the wake of a declining economic landscape. But they are also pressurized to increase their service levels. To avoid making unilateral cuts, food and beverage industry players must look strategically at their portfolio of procurement and sourcing expenditures to determine the best levers that help reduce maverick spend. One such lever is to use a more holistic approach to manage and procure goods and services through the use of a category management strategy.
Facing similar challenges, an international food and beverage brand was looking at tapping into new procurement cost management opportunities by centralizing all their sourcing and procurement operations. To do so, the food and beverage firm collaborated with SpendEdge to develop a category management strategy to fully leverage their purchasing decisions by focusing on the external supply market.
Category management extends beyond the concept of strategic sourcing. The category management process takes into consideration factors such as- supplier relationship management (SRM), the total cost of ownership (TCO), demand management, and supply chain risk management to empower the buying entity to make the most informed procurement decision possible. A detailed spend analysis was performed to establish the foundation for this process and to identify all the commodity categories purchased by the client. We then developed a framework to monitor the category strategies and focus on buying-channel optimization to monitor contract utilization and compliance.
With the help of the customized solutions, the food and beverage industry client gleaned comprehensive insights into the key levers for successful category management implementation. The results were significantly greater than the traditional approach previously adopted by the client. Though the initial objective was to reduce organizational spend by proactively managing the procurement expenditures. It was achieved in parallel with enhancing internal stakeholder relationships and improving supplier relationships, oversight and risk management.
The category management strategy involved a detailed analysis of end-to-end procurement processes, the results of which went beyond capturing initial savings to sustaining those savings over time. This was possible through an upfront strategy that took into account the end-to-end procurement process and category benchmarks.
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