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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.

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 to 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.

Category Management: What Are the Key Elements to Underpin Success

What is category management?

Category management techniques are used by companies to optimize the oversight and allocation of resources by organizing related products and resources into logical groups. This makes it easier to effectively manage these resources. Category management strategies are aimed at providing customers with what they want, where they want it, and when they want it. In order to achieve this, products are grouped into categories according to how they are used, consumed or purchased.

Category management in procurement helps an organization retain a focus on the most important business categories, typically in terms of profits generated and/or resources used. Value-based categorization may be determined through ABC analysis. It can also help in strategic sourcing, an approach to supply chain management that helps leverage the company’s purchasing power and find the best possible values in the marketplace.

Essential elements for the success of category management

If done correctly, category management can deliver far-flung and immense value in procurement. However, implementing a successful category management strategy is easier said than done. The much far-reaching and broader scope of category management makes it imperative for enterprises to have the right foundational elements without which they will struggle to drive meaningful, long-term results:

Organizational design

Designing an effective and optimal procurement organization is a fundamental process that enables enterprises to meet their business and procurement needs. To achieve this, companies must consider a number of key factors including, ongoing category management program, CRM approach, centers of excellence (CoE), and tactical buy desks. Deploying shared service centers or procurement-led CoEs to assist with tactical spend activities is another option that can be considered. Most enterprises today even have a procurement BPO provider to support their tactical sourcing.

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Top 4 Benefits of Category Management to Grow Your Business

Category management is a concept that is essential for businesses, which deal with retail and manage a plethora of items. It is a technique for companies to make an effective purchase and save a significant amount of money in procurement. But first, let’s understand what it is in layman terms.

What is category management?

Bundling of items in different categories is technically called category management. Let’s break category management into two parts: category and management. A category is generally a group of similar items that are bought by any company under a single deal. Management is all about the methods of procurement applied to make sure that the company maximizes its savings. Simplifying demand and taking a bigger contract is the key driver behind it. So, basically, the process of collecting and centralizing similar items into a single contract which makes procurement easy is known as 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

An effective and efficient category management plan can help your company to work with suppliers in a more effective manner and can fasten the time between the initiation and completion of the process. Category management, if done strategically, can help a new supplier or contract with layers of adjustments.

Greater client satisfaction

Category management is the sole responsibility of a category manager who looks after all the things related to a given contract or service like sourcing requirements, collecting bids, and negotiating contracts. This provides ample time for business people to concentrate on their work and deliver value-based services to satisfy client’s needs.

Better supplier relationships

Management of category provides an opportunity to establish contacts within the structure of the organization. This is facilitated by the coordination at the highest level and hence, the delegation of specific tasks takes place at the functional level. So, establishing and organizing effective communication in such a way usually helps in improving relationships between suppliers.

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.

To explore more about the benefits of category management

Category Management Enables a Leading Fine Chemicals Manufacturer to Enhance Service Efficiency – A SpendEdge Case Study

Engagement Overview:

The client, a pioneer in the fine chemicals manufacturing segment, was looking at achieving breakthrough value by focusing on category management. The client wanted to devise powerful, long-term category management strategies that are aligned with the stakeholder’s and corporate’s objectives. To identify and focus on the key category management strategies, the chemical industry client approached SpendEdge to help them leverage it’s strong expertise in category management to address challenges arising due to their inefficiency in category management.

The category management engagement entailed the use of a detailed quantitative analysis of various categories within the supply chain to identify and benchmark the best suitable category management strategies.

About the Client:

A multinational chemical industry firm specializing in the manufacturing of fine chemicals.

Business Challenge:

The omnichannel environment in today’s chemical industry was forcing the fine chemicals manufacturer to redefine their category management processes. Also, the dynamic nature of the chemical industry along with the availability of huge volumes of consumer data posed several new challenges, which accelerated the need for a major transformation in category management.

To overcome such challenges and devise multifunctional synergies across their global supply network, the fine chemicals manufacturer wanted to deploy an advanced category management strategy.

How did SpendEdge Help the Client?

Step 1: Grouping fine chemicals into various categories depending on the market demand

The initial step revolved around the process of defining the role of each category of fine chemicals and grouping them based on their market demand and usage. This helped the fine chemicals manufacturer to gain a better understanding of the various categories of fine chemicals. By doing so, the client was able to understand the importance of each value in terms of driving their profit margins.

Step 2: Devising appropriate category management strategies

Identifying the right category strategy is essential for any organization as it acts as a growth driver by increasing sales, improving market share, and enhancing return on investment. The category management strategies should, therefore, be fine-tuned to meet the category objectives. The adopted approach included a detailed assessment of the different categories to help the client develop precise goals and targets for each category to drive growth.

Step 3: A strategic three-step approach to fine-tune category management strategies and drive operational efficiency

The scrupulous three-step approach helped fine-tune the client’s category management strategies to ensure they meet their category goals and objectives. It also enabled the fine chemicals manufacturer to scrutinize their category management strategies to meet organizational goals, increase return on investments, enhance market share, and improve profit margins.

Key questions answered in this category management engagement include:

Benefits of the Engagement:

The category management engagement helped the fine chemicals manufacturer to identify category objectives and fine-tune their category management strategies. Our experts worked as an extension of the firm to identify the success factors that uncovered major opportunities within the fine chemicals segment.

Why is category management essential?

The growing competitive pressure in today’s chemical industry poses major challenges for players in terms of managing different categories to drive profitability. Moreover, the ongoing shift of power to the consumers along with its associated economics demands a precise category management approach that focuses on consumers’ needs and the strategies that have to be devised to fulfill the consumer needs and demands.

Due to such factors, chemical industry players are now looking at driving category sales through efficient category management. Since this requires the development of precise category management strategies, chemical industry companies are now approaching SpendEdge to leverage our market expertise in developing advanced category management programs to enhance their service efficiency and drive organizational value.

SpendEdge’s category management solutions are tailored to help chemical industry players enhance their market presence by devising effective category management solutions. Also, with the help of our category management solutions, it is now possible to align category management strategies with business objectives, which go hand in hand in helping you establish your brand as a true leader in the category by staying ahead of the curve.

Our Findings:

It is quite evident from this engagement that effective category management will eventually help you achieve the goals set for your brand. If your organization is on the lookout for an objective way to drive category growth, SpendEdge’s category management solutions will help you do so by being your roadmap to success. So go ahead and get in touch with our experts to build a category management capability that’ll help you enhance your market presence.

To know more about our category management solutions and how it can help chemical companies

Category Market Intelligence for the Manufacturing Sector – A SpendEdge Case Study

Engagement Overview:

A leading player in the manufacturing sector wanted to build a category management strategy for boosting their procurement functions. The client also wanted to enhance their category expertise and intelligence across all critical areas of the supply network. To do so, the manufacturing sector client approached SpendEdge to leverage a category market intelligence solution. A detailed quantitative analysis of various supply chain categories was carried out to build world-class procurement solutions.

About the Client:

The client is a leading player in the manufacturing sector, specializing in the manufacturing of automotive components.

Business Challenge:

The manufacturing sector client was facing several challenges in making optimal procurement decisions, which varied from broad macro data on price trends to highly granular supplier specific information.

How did SpendEdge Help the Client?

Step 1: Build a robust intelligence unit for managing frequently sourced categories

The first step revolved around the development of an internal intelligence unit for managing the frequently sourced categories. The development of this capability required investments in category intelligence tools that focus exclusively on a specific supply market. Leading players in the manufacturing sector have already made such investments, but in today’s scenario, there’s a larger scope for enhancing this capability by building an information infrastructure for capturing and sharing data across the organization’s supply network.

Step 2: Customized procurement and category market intelligence strategies

Supply market intelligence is essential to manage the dynamics of the global supply network. Customization of procurement and category management strategies can help reduce the time allocated for information gathering and enable manufacturing companies to focus on strategic sourcing.

Step 3: Built a robust category market intelligence framework

To devise an effective intelligence framework, it is essential to differentiate frequently sourced categories from the infrequently sourced categories. The developed framework enhanced value through a basic process that captured category data based on sourcing activities. It also enabled the client to populate simple supplier information and rate databases with information about both supplier capabilities and past performance, as well as a price and rate information.

Key questions answered in this category market intelligence engagement include:

Benefits of the Engagement:

The category market intelligence experts at SpendEdge helped the manufacturing sector client to enhance their procurement efficiency by devising an effective category management strategy. Category market intelligence also enabled the client to gain detailed insights into the different categories within the supply network.

Why incorporate category market intelligence in the manufacturing sector?

Excelling in category management is an important goal of procurement organizations globally. New imperatives have emerged out of complex market landscapes besides cost savings; thereby, compelling manufacturing companies to view the role of procurement through the prism of innovation, risk, flexibility, cost, and speed.

SpendEdge’s category market intelligence solutions are aimed at offering personalized category management solutions to procurement teams to help them cut down the time allocated for information collection and analysis. Implementing our category market intelligence solutions helps procurement professionals to focus on category management and drive organizational value. This helps them to emphasize on adding value to procurement rather than cutting procurement costs.

Our Findings:

The role of intelligence in procurement as a strategic enabler of business success is now bigger than ever. Effective category management helps manufacturing sector firms to develop a leading category market intelligence capability, which proves to be challenging even for the most resourceful organizations. Therefore, it is essential for businesses to develop a strong foundation in category management as it helps deliver breakthrough value and elevates the role of procurement by helping them gain access to the organizational spend data.

To know more about our category market intelligence solutions

Category Management for a Leading Manufacturer of Transportation Fuels

Engagement Overview:

A leading player in the energy industry specializing in the manufacturing of transportation fuels wanted to implement an integrated category management strategy. To develop a strategy that aligns with their business goals, the transportation fuels manufacturer approached SpendEdge to devise a comprehensive approach to category management. A detailed quantitative analysis of various categories within the supply chain was carried out to identify and benchmark the industry best practices to be followed.

About the Client:

A multinational energy industry firm. The client is a leading manufacturer of transportation fuels with years of expertise in production, exploration, refining, and marketing of oil and natural gas.

Business Challenge:

The energy industry client was facing challenges in developing an integrated category management strategy to analyze supply chain processes and focus on key areas that drive business value.

How did SpendEdge Help the Client?

Step 1: Compilation of questions to be answered in the category plan

Every category management plan has to address some key questions. The first step in this assessment was aimed at gathering data from several sources and identifying the key questions that had to be addressed in the category plan.

Step 2: Developed a category plan based on market insights and recommendations

The category plan helped address key areas of category management. It included- opportunities, gaps, category strategies, goals, product assortment, placement, pricing, and targets.

Step 3: Devised a three-step strategic implementation plan

The implementation of the developed category plan was carried out in a three-step approach. It included all the key implementation processes, making it easier for the category management team to follow.

Key questions answered in this category management engagement include:

Benefits of the Engagement:

The category management engagement helped the transportation fuels manufacturer to devise a strategic category plan. Also, with the help of a category plan, the energy industry firm was able to abolish fragmented buying to achieve sustainable savings across the organization’s spend profile.

Why incorporate category management solutions?

The growing demand and gradual deregulation in the energy industry have initiated several expansion plans that have subsequently given rise to a supply-demand mismatch in corresponding end market segments. Factors such as these are compelling leading companies to adopt precise category plans. Category management is a proven and effective way to utilize market data and increase sales.

Also, it enables category leaders to control, influence, and manage the category to drive significant savings. However, implementing the right category management strategy is the key to opening up a whole host of new opportunities for businesses across sectors.

Our Findings:

The key outcome of the engagement revolves around identification and implementation of value opportunities. It helps reduce wasteful spending; thereby, helping businesses to compete more effectively. If your organization is on the lookout for an all-encompassing solution to drive category growth, category management is the ideal approach to identify and develop precise category plans.

Moreover, category management acts as an instrumental technique for improving category sales and delivering operational excellence. It also helps overturn the inertia that often sets in when businesses become inward-looking and cloistered.

To know more about our category management solutions

Cargo Services Market Intelligence Engagement: Offering Tips for Portfolio Analysis

Engagement Overview:

The client wanted to enhance service efficiency and delivery capabilities across their supply network. To proactively address the challenges in achieving their objective, the cargo services provider approached SpendEdge to conduct a detailed portfolio analysis. Our experts developed a three-step methodology that helped the client to drive business value.

The category market intelligence engagement helped the cargo services provider to gain detailed insights into information related to the market, cost, supply, and demand. Moreover, portfolio analysis that was conducted as a part of the category market intelligence engagement enabled the client to focus on core services that have a higher probability to establish value-added and long-term relationships with clients.

About the Client:

The client is a leading player in the cargo services industry.

Business Challenge:

The cargo services provider was facing difficulties in improving their portfolio management capabilities.

How did SpendEdge Help the Client:

Step 1: Diversification of business strategies

Identification of factors that led to significant losses led to the development of more appropriate and new business strategies.

Step 2: Reprofiling the business strategies

Reprofiling business strategies helped in shifting focus to core services that ranked in the top tier of the industry.

Step 3: Clearing the long-tail in professional services

Additional tougher decisions regarding service offering enhancements required the cargo services firm to focus on driving profitability by developing win-win agreements with key clients who possess a sustainable infrastructure.

Key questions answered in this category market intelligence study include:

Benefits of the Engagement:

Our category market intelligence solution assisted the cargo services firm to gather and analyze specific information relevant to the organization’s supply market. It also enabled them to optimize decisions by leveraging market facts and data pertaining to different categories.

Why incorporate category market intelligence?

In today’s competitive business scenario, the need for world-class procurement is more pressing than ever. This is mainly due to the rise in market volatility along with growing economic pressures that are forcing organizations to do more with less. However, devising a top-notch procurement model with the necessary market intelligence capabilities for support poses a major challenge even for the most resourceful organizations.

Our Findings:

Considering the fast pace at which markets are developing, it’s extremely important for an organization to explore the plethora of available resources available to categorize demand and develop solutions to meet specific requirements. Moreover, supercharging the category market intelligence capabilities of your organization enhances your strategic sourcing capabilities and offers detailed insights that are required to drive business value.

To know more about our category market intelligence solutions

Related Posts:

Strategic Category Management: Going beyond ‘strategic’ in strategic sourcing

5 Rules of Category Management That Every Retailer Should Swear By

Category management is a common term in the world of retail. This technique can be used by retail stores not only to manage clusters of items within a shop environment but also acts as a way for companies to buy more efficiently and save significant sums of money in procurement. So, what exactly is category management all about? In a nutshell, it is the concept of segregating similar products into separate groups. A category is essentially a group of related items that a company wishes to buy under a single deal. The management aspect is concerned with applying procurement methodologies to ensure the firm maximizes their savings. In the broader sense, category management aims at meeting customer needs and maximizing the value of the retail shelf space. Here are five rules of category management that retail stores must follow:

Rule #1: Be involved in decision making

Most retail stores will have a lead supplier who has the inside running because they have better access to the necessary data and decision makers. This doesn’t mean retailers cannot participate in decision-making. Being persistent, informed, and helping the buyer management hierarchy achieve their KPI’s all contribute to nurturing relationships that will benefit retailers in the long run. It is essential for retailers to know the relay schedules and be involved in planning discussions.

Rule #2: Understand the volumes and margins

Retail stores must understand the volumes and margins of all products in the category and manage their recommendations to the retail buyer with their objectives also taken into consideration. Retailers must aim at maximizing the absolute margins that come from the shelf space, rather than just concentrating on their individual margins.

Rule #3: Calculate sales from different shelf positions

Another important rule of category management is to understand how the shelf positions of different SKUs’ impact the sales. In the case of retail stores which deal with a large number of products, it is practically not possible to place all the products at an eye-level. Retailers have to decide if more sales will come from placing products at a higher level or a lower level. Companies in the retail industry also have to determine the type of shelf grouping – by size, brand, or flavor that would result in maximum sales. This can be done by experimenting with different combinations and comparing the sales data after the changes have been made.

Rule #4: Leverage seasonal volumes

Seasonal sales are an excellent opportunity for retailers to experiment with the manner in which they allocate their shelf space and undertake category management. For instance, during Christmas, retailers tend to allocate products carefully, as they seek to maximize their seasonal sales. Seasonal sales account for a good spike in the sales volume and profits made by most retailers. Hence, careful category management and planning is crucial in the case of seasonal sales and the preparation for the same should be done well in advance.

Rule #5: Maintain planogram discipline

Planogram is a document that executes the category management decisions at store level. Retail stores use the planograms to organize the selling face in the stores, and also as a medium to maintain discipline on store management. But retailers can apply creativity to the manner in which products are displayed to encourage cross-selling and up-selling opportunities but without destroying the discipline of the planogram.

To know more about the applications of category management in retail stores

SpendEdge’s Category Management Study for a Consumer Financial Services Client Helps Categorize their Business Spend

Overview of the Consumer Financial Services Industry

With regulatory changes and emerging technologies, financial institutions are transforming the way they manage risks and improve business effectiveness. The global consumer financial services industry typically includes establishments involved in offering personal loan services, credit card services, mortgage lenders and brokers, and consumer leasing providers. Moreover, renowned organizations in the consumer financial services space are focusing on improving their operating models to provide better transparency into the services rendered. Despite the financial crisis, prominent consumer financial services providers are focusing on offering reliable and affordable financial services to meet the growing consumers’ demands. Although the consumer financial services space is witnessing promising growth, some of the factors influencing the growth of the space are:

Meeting the rising demand for customer services: Since the financial crisis, prominent consumer financial services organizations are facing public scrutiny to regain customer trust and re-establish economic strength. In this era of seamless internet banking, there is a huge gap between the institutions and customers. With the rising demand for reliable and affordable services, leading financial services providers are facing pressures to deliver agility in the services rendered.

Cost reduction and efficiency: The growing competition in the financial services space is compelling organizations to offer reliable solutions at reasonable prices. Also, the regulatory changes implemented by the authorities to bring the cost of the services to a considerable rate are further forcing businesses to act in accordance with the compliance requirements.

Leveraging technologies and innovations: The rising market consolidation and technological advances are forcing prominent consumer financial services providers to stay relevant and updated with the current technologies. Moreover, the growing concern to enhance the market share and profit through brand differentiation is compelling businesses to offer innovative products and services to the customers.

To address these challenges and meet the increasing preferences of the customer segments, prominent organizations are facing the need for a category management solution. Category management involves the process of applying procurement methodologies to ensure maximum savings.

The Business Challenge and Journey

The client, a prominent consumer financial services provider, wanted to conduct an in-depth market analysis and focus on specific areas of spends. The client wanted to create data transparency and ensure sustainability in the services being rendered. Moreover, the client wanted to seek ways to tap procurement cost-reduction opportunities by coordinating and centralizing procurement activities. With the help of our category management solution, the client wanted to categorize the services into logical groups to efficiently allocate resources. Moreover, the primary objective of the client was to understand the price trends and fluctuations for the services being rendered and identify savings to promote growth opportunities.

To retain focus on the most important business categories, SpendEdge’s category management experts carried out an extensive research. The comprehensive methodology comprised of interviews and discussions with prominent stakeholders in the consumer financial services space. Moreover, to gain adequate insights into the strategic sourcing, category management experts at SpendEdge also compiled information across a wide array of secondary sources such as paid industry databases, company presentations, and industry forums.

The category management solution offered by SpendEdge helped the consumer financial services provider gain adequate insights into the consumer buying patterns. The client was also able to focus entirely on the service category and categorize the services based on the market trends. Moreover, the client also sought ways to analyze the current market opportunities and enhance their marketing strategies to meet the business requirements.

Key questions answered in this category management engagement

IR- category management

The Results

During the course of this engagement, the consumer financial services provider was able to realign their marketing strategy to attract customers by offering a differentiated set of services. The client was able to streamline their procurement functions and design compelling assortments to price and promote the services in the market.

To know more about our category management solutions

12…4 Next →

Top category management challenges

Getting Stakeholder participation

Workforce capability gaps

Garnering support from management teams

The SpendEdge Advantage

What is category management?

Essential elements for the success of category management

Organizational design

What is category management?

Category management benefits

Healthier performance of suppliers

Greater client satisfaction

Better supplier relationships

Better insights into spending

Engagement Overview:

About the Client:

Business Challenge:

To overcome such challenges and devise multifunctional synergies across their global supply network, the fine chemicals manufacturer wanted to deploy an advanced category management strategy.

How did SpendEdge Help the Client?

Key questions answered in this category management engagement include:

Benefits of the Engagement:

Why is category management essential?

Our Findings:

Related Posts:

About the Client:

Business Challenge:

How did SpendEdge Help the Client?

Key questions answered in this category market intelligence engagement include:

Benefits of the Engagement:

Why incorporate category market intelligence in the manufacturing sector?

Our Findings:

To know more about our category market intelligence solutions

Related Posts:

Engagement Overview:

About the Client:

Business Challenge:

How did SpendEdge Help the Client?

Key questions answered in this category management engagement include:

Benefits of the Engagement:

Why incorporate category management solutions?

Our Findings:

To know more about our category management solutions

Related Posts:

Engagement Overview:

About the Client:

Business Challenge:

How did SpendEdge Help the Client:

Key questions answered in this category market intelligence study include:

Benefits of the Engagement:

Why incorporate category market intelligence?

Our Findings:

To know more about our category market intelligence solutions

Rule #1: Be involved in decision making

Rule #2: Understand the volumes and margins

Rule #3: Calculate sales from different shelf positions

Rule #4: Leverage seasonal volumes

Rule #5: Maintain planogram discipline

To know more about the applications of category management in retail stores

Related Posts

Overview of the Consumer Financial Services Industry

The Business Challenge and Journey

Key questions answered in this category management engagement

The Results

To know more about our category management solutions

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