Tag: category management

category management

Is a Category Management Strategy Crucial for Retailers to Reap Monetary Benefits?

SpendEdge, a leading provider of category market intelligence solutions, has announced the completion of their latest presentation on how category management strategy can help retailers reap monetary benefits. The article offers detailed insights into the benefits of category management reaped by our clients. The article also highlights how category management strategies can help retailers to identify key value categories, increase category sales volume, and reduce organizational spend.

Calculating Price Awareness Score by Deploying an Effective Category Management Strategy

With increasing complexities in the retail-CPG industry, it has become crucial for companies to analyze their category management strategies. One of our clients, a leading CPG company in Europe, was facing difficulties in achieving their desired category growth. They wanted to identify key value categories (KVCs) and key value items (KVIs) to optimize pricing and improve profitability. While analyzing product categories, they also wanted to increase their sales volume.

The category management services offered by our experts helped the client to develop a robust category management strategy and identify 50 KVCs that accounted for more than 50% of the client’s total sales. Additionally, the improved category management process helped the client to analyze transaction data, determine the frequency of purchase, calculate the price awareness score, and improve profit margins by 11%.

Proactively Managing the Procurement Expenditure to Reduce Organizational Spend

Improving brand awareness and driving business growth has always been a challenge for companies in the food and beverage category. A renowned food and beverage brand was facing increasing pressure to reduce costs in the wake of a declining economic landscape. They wanted to centralize all their sourcing and procurement operations to gauge new procurement cost management opportunities.

To help the client address such challenges, our experts developed a robust category management strategy to fully leverage their purchasing decisions by focusing on the external supply market. They focused on buying-channel optimization to monitor contract utilization and compliance. This helped the client to proactively manage the procurement expenditure and reduce organizational spend.

Achieving Savings of $6 Million for a Fashion Retail Firm

The fashion retail industry poses a plethora of challenges for category managers when it comes to driving profitability through different categories. The client, an American multinational retail-clothing firm decided to leverage our expertise to address declining profit margins. They wanted a structured approach to manage different categories and distinct areas of expenditure.

During the course of this engagement, our category management specialists tailored a comprehensive research methodology to remodel their procurement services. They conducted an in-depth market analysis to help the client strengthen stakeholder relationships and achieve savings of $6 million over a period of one year.

About SpendEdge

SpendEdge delivers robust, real-time category management solutions to help sourcing and procurement professionals to manage supply chain. Our innovative category management solutions help enterprises to transform the structural capabilities of businesses and improve execution efficiency. Our state-of-the-art category management solutions also help enterprises to transform structural capabilities, improve execution efficiency, and achieve better cost savings. We provide businesses with actionable insights and techniques to improve their category management capabilities.

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category management strategy

Calculating Price Awareness Score and Ranking SKUs for a CPG Company with the Help of a Category Management Strategy

CPG Industry Overview

Increasing complexity in the retail-CPG industry has compelled many companies to take a closer look at their category management strategies. Retailers and CPG companies are seeking higher levels of insights to devise category management strategy to effectively reach consumers who have more choices than ever before in terms of channels, stores, and products to choose from. However, it is not easy since CPG product categories are experiencing falling prices and little to no growth. Stagnating mass market, fragmented niches of growth, cross-channel shopping, and the continued rise of discounters are a few more challenges impacting their market dominance.

Business Challenges Faced

The client, a leading CPG company in Europe that creates wholesome foods and offers them in over 150 countries, was facing predicaments in developing strategies to drive category growth. They wanted to optimize pricing and improve profitability while identifying infrequently bought products. They also wanted to identify key value categories (KVCs) and key value items (KVIs) but lacked a category management strategy for doing it. The client, therefore approached SpendEdge to help them increase sales volume by analyzing product categories.

Want to know how an effective category management strategy can help you identify KVCs and KVIs? Request a free proposal to formulate a category management strategy and we will get back to you within two working days.

Our Research Approach

To help the client identify key value categories, the experts at SpendEdge developed a robust category management strategy. The strategy helped the client to identify 50 KVCs that accounted for more than 50% of the client’s total sales. The team then analyzed key value items within these categories to ensure that the final of KVIs covered a broad and representative set of categories. The team also offered category pricing solution to help different stores to adjust prices depending on the competitive environment

The tailor-made category management strategy helped the client to analyze transaction or loyalty-card data and determine the products that often appear in baskets alongside other price-sensitive items. Based on the frequency of purchase and share of category sales for items in the KVCs, the client calculated price awareness score. The scores helped the client to rank the SKUs within their categories.

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Engagement Outcome

The category management strategy helped the client to identify KVIs that accounted for 10%-15% of sales in the category.  This empowered the category managers to benchmark their assortment and prices against those of discounters and improve profit margins by 11%.

Leveraging category management services is crucial for companies to drive category sales and improve the category management process. Subscribe now to access accurate category and pricing insights from procurement experts. 

Best Practices to Develop an Effective Category Management Strategy

  • Determine product categories by bringing together products or services that have the same features.
  • Ensure that the categories are aligned to business goals.
  • Develop category benchmarks to identify improvement opportunities.
  • Perform price analysis while monitoring of trends in the category.

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category management

Analyzing Key Components of Category Management and Uplifting Sales Volume by Over 10% for an FMCG Company

 

Key Components of Category Management

  • Performance measurement
  • Strategy
  • Organizational Capabilities
  • Trading Partner Relationships
  • Business Process
  • Information Technology

 

The above-mentioned components of category management are considered vital, without which category management cannot be practiced. Out of the six components of category management, strategy and business process are core components. Rest four factors i.e., performance measurement, information technology, organizational capabilities, and co-operative trading partnerships enable the core components to achieve the company’s overall objectives. Category management business process lays a strong emphasis on how work is done within and between organizations. It creates a balance between product and process investments and helps businesses to reduce costs.

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Analyzing Key Components of Category Management and Uplifting Sales Volume by Over 10% for an FMCG Company

Category Management Process

Developing an 8 Step Category Management Process for a Medical Devices Supplier in the US

The medical devices market in the US is expected to offer a wide range of opportunities for companies. However, companies need to integrate innovations, streamline their operations, and reduce costs to survive in the medical devices market. They also require category management process that would offer incremental category benefits and reduce costs.

The Business Problem

The client is one of the fastest growing medical devices companies in the United States with an annual revenue of over $5 billion. They were looking for opportunities to identify the typical levers that can be deployed to maximize the incremental value of the organization and support appropriate resourcing. However, the strong preference for a particular product category by buyers (doctors, nurses) was inhibiting the client’s capability to better understand the medical consumables category. The clinical difference and price difference were a few other reasons that were obstructing the organization’s growth prospects.

Improving the category management process is critical for companies to maximize the incremental value. Request a free proposal and access our service portfolio of category management solutions.

Solutions Offered and Client Journey

To compete with top companies and address concerns of stakeholders, the medical devices supplier decided to engage with SpendEdge. The team of analysts at SpendEdge conducted a continual analysis to keep the client ahead of trends, risks, demands and supply changes. They also gained in-depth insights into the demand structure for goods and services used by the company and recommended an 8 step category management process to avoid the wastage of money by the medical devices supplier. In addition, the experts also worked closely with suppliers to help the client continuously innovate and achieve better outcomes.

SpendEdge’s team focused on improving category management process and implementing cost down improvement initiatives to help the client  achieve high profit margins. They enhanced supplier performance management and explored alternative mechanisms to verify current pricing against alternative suppliers. This helped them to create an environment that delivered the lowest long-term cost structure.  The category managers further identified the lowest total cost procedures and centres of excellence for the  medical devices supplier and helped them achieve the same outcome at lower costs.

Wondering how a category management process can help companies to strengthen their position in the medical devices market?

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Key Findings and Outcomes

Achieved Savings

The progression from the initial sourcing of the medical consumables category through various levels of category management helped the client to achieve savings of over 17% in a year. Furthermore, implementing an 8 step category management process helped the medical devices supplier to achieve an incremental cost reduction of 2-3 %. Also, the category management process ensured that savings are sustained and costs continue to reduce in the coming financial year.

Improved Visibility into Spending

The category management process enabled the medical devices supplier to establish a single point of contact within the organization and improved coordination. This helped the medical devices supplier to figure out the accuracy of the reported spend.  Want to gain detailed insights, request for more information.

8 Step Category Management Process

Category Management Process

The 8 step category management process is highly beneficial for firms and encompasses all important strategies. It helps businesses to establish their brand as a true leader in the category and differentiate from competitor companies.

Define Category: This step is the most crucial step as it defines the understanding of buyers. It identifies the criteria on which buyers make their decision while procuring medical devices.

Category Role: Role identifies the importance of the category to the buyers. There are nine commonly recognized categories in medical devices that can be identified according to their relevance in healthcare equipment.

Category Appraisal:  Analyzing how these medical devices perform across different healthcare units is the next step in 8 the step category management process. It includes pricing and placement assessment apart from the affordability factor.

Category Scorecard: It assesses patient data and identifies devices critical for their health. Scorecard also helps companies in setting up measurable targets in terms of sales, volume, margins.

Category Strategies:  Category strategies are outlined to meet the scorecard objectives. A framework suggesting for marketing is created and the supply of medical devices is ensured.

Category Tactics:  Tactics involve specific actions needed to achieve the desired outcomes from set category strategies. Category tactics ensure that strategies are put on the right track.

Plan Implementation: The success of this 8 step category management process depends on the implementation of category plan as per the laid objectives. The plan involves a systematic schedule to achieve the objectives.

Performance Assessment: This is an on-going process that analyses, measures, and reviews the results. It helps medical companies refocus and improve existing electronic, surgical, and medical equipment.

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Spend Analysis : Assessing the Current Spend and Improving Supply Chain Efficiency for a Medical Devices Company – SpendEdge

Spend Analysis Solution Transforms Finance Operations and Reduces Operating Costs

About the Client 

The client is a leading medical devices company, specializing in the development of medical devices, laboratory instruments, and diagnostic products. The company supplies devices to hospitals, laboratories, and clinics worldwide. The company has ingrained its place as a leader in the medical devices market.

The Business Challenge 

The future looks sharp for the medical devices industry. With global economic growth, innovations and an aging population that has a growing need for healthcare, revenue for medical devices is poised for growth. However, in this turbulent environment, companies that can shift their supply chain priorities and better manage spend will be able to deliver significant value. Moreover, the rising need for supply management and strategic cost management have urged players in the medical devices manufacturing space to leverage the use of robust spend analysis solutions. Spend analysis solutions help companies in the medical devices manufacturing space to identify the potential opportunities and deliver actionable insights into the spend data to generate improved ROI. The spend analysis solutions also address concerns about the maverick spends across the supply chain and help achieve superior supplier relationship efficiently.

The client, a renowned medical devices company was facing challenges in reducing the cost across the supply chain and managing their tail spend. While public spending has become endemic, the client realized the need to drive more competitive pricing. Moreover, the client’s objective was to adopt spend analysis strategies to identify and optimize their spend areas. Additionally, the client needed to streamline their supply chain management and subsequently maximize profits by leveraging SpendEdge’s spend analysis solutions.

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Laptop with pen and spiral notebook on desk.

Common Category Management Challenges and Ways to Overcome Them

Category management originated from the retail industry. This retailing and supply management concept involves breaking down the products purchased or sold by a retailer into discrete groups of similar or related products. Category management is a systematic approach to managing a set of products as a strategic business unit. However, recently, category management has been gaining ground outside the retail industry and is being widely used in several public and private sector companies. The motive behind it remains the same; products or services that have similar characteristics and similar supply markets are grouped together and treated as a discrete group. While category management has several known advantages, here our category management experts discuss some of the key challenges faced while implementing it.

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Top category management challenges

Getting Stakeholder participation

In several procurement organizations, the stakeholders are either unknown or they are not in close contact with the stakeholders. It is critical to ensure that the stakeholders understand the importance of the category management, which means that they have to put in some work as well. This transforms the stakeholders to active participants and will improve the results for the procurement organization. Without the support of your stakeholders, the results of the new way of working will be disappointing.

Workforce capability gaps

The transformation of an operational department to a more strategic department results in a chance for gaps in the workforce capabilities. This could be because the organization lacks the skills and capability to become the advisor of the business. This situation can overcome by providing specific training and coaching on the skills and capabilities that are needed trequest proposalo the company’s workforce. Furthermore, they can also be provided with coaching-on-the-job, where experts coach the buyers in the new way of working. For capabilities to be enhanced, a budget needs to be made for supporting the training costs for buyers.

Garnering support from management teams

The need for change often comes from the management team of a company. However, during the course of transformation, the same team may display a lack of engagement and operational support. This leads to a transformation that does not fully realize the benefits out of the category management. In order to gain the maximum benefit from category management, there needs to be full support from the management team throughout the transformation. The management team should be available to support with data analysis, value-chain/TCO-analysis, stakeholder meetings, and supplier negotiations.

The SpendEdge Advantage

Businesses can greatly benefit from adopting category management as one of its best practices in procurement. SpendEdge’s category management solutions have the capacity to add value in reducing supply chain risk as well as drive innovation in different supply chain categories. Our category management experts have proven expertise in helping organizations tap into opportunities in order to manage demand, have better cash flow management, and enforce greater compliance of standards from suppliers. Get in touch with us for tailor-made solutions to suit your business.

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