What is strategic sourcing and why is it important?
Organizations have been successful in driving efficiency through strategic sourcing. Today, procurement is on the verge of a new era. However, to achieve breakthrough value, organizations are now looking at developing their skillsets and modes of operation through strategic category management. Category management fundamentally varies from strategic sourcing and builds on the credibility that strategic sourcing professionals have created for themselves over the years. Category management is aligned with several business processes, it not only involves comprehensive supplier management and customer management approach but offers a more facilitative way of building solutions that support both business and category objectives.
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Strategic Sourcing vs. Strategic Category Management
Strategic sourcing includes the methodologies and related techniques involved in the optimal sourcing of goods and services necessary to meet business requirements.
Strategic category management is a part of supply management, where the services and products sourced by the organization are broken down into discrete groups of similar products or services. Moreover, strategic category management is simply category management in a strategic context.
Benefits of category management:
- Creates considerable value for business beyond the agenda of strategic sourcing.
- Focuses on the complete lifecycle of the products and services involved.
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Building blocks for sustainable strategic category management
Category definition and segmentation: Before you develop a strategic category management plan, it is essential to define each category. It is necessary to create a baseline using common terminologies, templates, and processes. It involves dividing the market into segments that are profitable, actionable, and accessible. Moreover, it would be impossible to target the entire market because of several constraints such as time and cost. Defining each category and segmenting them into similar groups forms the basis of strategic category management.
Design a strategic category management dashboard: Every business organization has a different strategy that they wish to pursue. Therefore, a strategic category management dashboard differs for various organizations, as it is specific to their strategy. However, the aim is to create a dashboard that supports your business strategy and scorecard goals. Scorecard goals may be set according to the goals by including an increase in ROI, reduction of inventory costs, and increasing your stock turn. It includes the strategic allocation of work to be performed to reach business objectives.
Develop the necessary skillset and implement the strategies: Access to the right skill set is required to gain maximum benefits from the category management dashboard. Also, strategic category management executives and practitioners need to understand the challenges and opportunities before the deployment of category plans. Developing the necessary skillsets and implementing the right strategies will go a long way in defining the growth potential of the organization. It is essential to ensure that the procurement team of tomorrow has the required skills, processes, and tools that best drive success. Transforming procurement to operate more strategically requires careful planning and execution to identify essential skillset gaps and performance expectations. Also, organizations must ensure they identify performance gaps and build necessary procurement skills to focus on a strategy that is sustainable, cohesive, and adds value for stakeholders.
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Category management for a leading beverage industry client
Challenge: The client, a leading player in the beverage industry wanted to gauge the customer data and make better-informed business decisions to drive category growth.
Benefits offered: Helped the client identify growth drivers and offered an accurate picture of the entire category, which enabled them to shift to a customer-centric business model.
SpendEdge shares your passion for driving sourcing and procurement excellence. We act as a global strategic partner for leading Fortune 500 firms and other leading companies across industries. Our strength lies in delivering robust, real-time procurement market intelligence solutions that help sourcing and procurement professionals make informed decisions. Our innovative procurement solutions also help enterprises transform structural capabilities, improve execution efficiency, and fast-track time to savings.
Every business needs smart procurement intelligence to stay at the top of their game; we provide actionable insights utilizing lean methodology to help enterprises make better purchasing decisions. We offer businesses with the precise combination of resources, tools, and techniques to help them redefine sourcing and procurement capabilities. We cover a broad spectrum of industries starting from pharmaceutical and life sciences to transportation with expertise in supply market intelligence, spend analysis and benchmarking supply chain risk assessment, and category management.