Benefits of Category Management in Procurement

By: Manpreet Kaur

Category management in procurement is a strategic approach to managing and optimizing the acquisition of goods and services within an organization. It involves grouping similar products and services into categories and then managing each category as a strategic unit. Effective category management offers numerous benefits, including cost savings, better supplier relationships, strategic sourcing, increased efficiency, risk management, and more. It helps organizations optimize their procurement processes and achieve their strategic objectives. By taking a category-specific approach, procurement teams can better meet the organization’s goals while continuously improving their processes and practices.

Challenges/Problems faced in the procurement process

Supplier Relationship Management:

Building and maintaining strong relationships with suppliers is critical for category management. Organizations need to collaborate with suppliers to achieve cost savings, quality improvements, and innovation. However, managing these relationships can be challenging, especially when dealing with a large number of suppliers or global supply chains. It can be a struggle to ensure compliance, negotiate favorable terms, and resolve disputes

Supply Chain Disruptions:

Managing procurement categories becomes challenging when there are disruptions in the supply chain, such as natural disasters, geopolitical issues, or unexpected events like the COVID-19 pandemic. These disruptions can lead to shortages, delays, and increased costs. To address this challenge, organizations need to develop resilient supply chain strategies, identify alternative suppliers, and maintain adequate safety stock levels.

Cost Control and Price Volatility:

Controlling costs within procurement categories is a constant challenge. Price fluctuations in raw materials, commodities, and market dynamics can impact the budget and profitability of an organization. In addition, procurement professionals must continuously evaluate and negotiate pricing with suppliers to ensure competitive rates. This requires a deep understanding of market trends, negotiation skills, and the ability to find cost-saving opportunities within the categories.

How SpendEdge can help the industry in overcoming the challenge

Finding Reliable Suppliers:

Supplier identification is not a one-time process but an ongoing effort in procurement intelligence. It’s essential to maintain a dynamic list of qualified suppliers and adapt to changing market conditions and organizational needs. We at SpendEdge can help you identify the right suppliers from your geographies of choice with the right set of capabilities. We have expertise in conducting deep dive assessment on suppliers operational and functional capabilities, their market position, geographic presence, pricing models, cost structure, discounting options, key certifications, key clientele and many more. We can also support in identifying the right negotiation tactics that can be used to get the right price for the best quality of products/services.

Supply Chain Analysis:

 This is a process that involves evaluating and understanding the various components and activities within a supply chain. This analysis helps organizations optimize their supply chain operations, reduce costs, improve efficiency, and enhance overall performance. It is a key element of modern supply chain management, especially in a global and highly competitive business environment. We at SpendEdge can help you in mapping the supply chain, gathering data related to various aspects of the supply chain, including lead times, transportation costs, demand forecasts, and order processing times. We can also help you in identifying the right key performance indicators (KPIs) to measure the effectiveness and efficiency of the supply chain and major risks associated such as natural disasters, political events, or supply chain partners’ financial instability etc. 

Pricing Intelligence:

Having better visibility on prices of different products or services is crucial for procurement managers as it helps them in achieving better cost savings, supplier negotiation leverage, and better supplier relationships. We can help you in conducting deep-dive price benchmarking studies to understand the prices offered by different suppliers for specific products/services of your choice, we can develop comparisons and provide a detailed break up of the cost, provide visibility on the discounting options, contracting terms and best practices, price variation by different regions or countries, negotiation tactics, client success stories and many more.

The success story of how SpendEdge was helpful to one of its clients

One of the leading Europe based Automotive company was looking for a partner who could support in conducting a detailed category intelligence study on Facilities Management category.

The client wanted to gain an understanding of the overall Facilities Management category covering identification of the key suppliers operating in the market, current procurement trends and best practices that are being followed in the market etc.

To support the client requirements, we conducted a deep-dive analysis to gather information on the market trends, drivers, challenges, technology landscape, risk areas, regulatory landscape, SLAs and many more. We identified the most prevalent engagement models in the market and the pros and cons of each of the models. Provided better understanding of how the pricing/engagement models are designed, what are the key cost components and the major cost drivers. We also did a detailed supplier analysis starting from identifying the right suppliers to conducting a detailed analysis on their operational and functional capabilities, key risks client might come across and what could be the mitigation strategies.

This study helped the client get better visibility on the best strategies that can be followed for example choosing an IFM model over sourcing individual FM services from different suppliers, negotiation tactics that can be used to get the best price and right suppliers that client could engage with.

Contact us now to solve your procurement problems!

Author’s Details

Manpreet Kaur

Assistant Manager Presales – Sourcing and Procurement Intelligence

Manpreet is a presales specialist at Infiniti Research and has expertise in sales, business strategy execution, and innovative solution design. She is actively involved in supporting clients from F&B, CPG, Healthcare, Pharma, Chemicals, BFSI, Oil & Gas and Automotive sectors.