Tag: procurement strategy

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A Comprehensive Guide for Companies to Develop an Effective Procurement Strategy

Rising competition and globalization have compelled companies in the world market to develop international procurement strategies, improve quality and delivery enhancements, and increase responsiveness to customers. This is not possible without developing an effective procurement strategy, backed by the organization’s need to uniquely customize their strategies to tackle the varied requirements of today’s customers.

Executing a well-defined procurement strategy depends on factors such as current market conditions, types of initiatives of the organization, and the current state of the procurement organization.  However, businesses need to be ready to adapt to changing business needs. This might require them to build a new strategy for their purchases. There are certain steps that companies can take to build an effective procurement strategy.

At SpendEdge, we understand the impact that a well-defined procurement strategy can have on external spend and the procurement operations of a business. Therefore, in this blog, our team of experts has highlighted five easy steps to build a potent procurement strategy.

Have you ever thought how an effective procurement strategy can improve your procurement operations?  Get in touch with our experts and know why having an effective procurement strategy is a must for your organization.

Steps to build an effective procurement strategy

Step 1: Analyze the current situation

Before developing any procurement strategy, companies need to take the time to figure out what aligns with the objectives of their company. They should know their future requirements and identify key areas of improvement. To achieve this, companies need to know the risks and market position associated with their business. Identifying risks involves the consideration of various factors such as market maturity, market capability and political opportunities, and risks and stakeholder management.

Step 2: Prioritize what’s important

Once the situation has been critically evaluated, it’s important to document drivers and link between the procurement strategy and corporate goals. Strategic drivers differ greatly from industry to industry. Therefore, firms should first gather details on corporate goals and then map procurement objectives to each.

Step 3: Build trust among suppliers

Suppliers not just only form an integral part of businesses, but also play an important role in increasing the operational and cost efficiencies. Building credibility and trust among the team will help companies to deal with high volume or last-minute demands and the successful implementation of a procurement strategy. As a company, you have to be fair while dealing with suppliers and ensure that they are paid on time.

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Step 4: Develop measurable targets

Although boosting sales remains one of the prime objectives for businesses, but companies need to be more specific while building a procurement strategy. They should precisely know if the targets set by them are specific and measurable or not. Providing a consistent tool to track key metrics linked to the procurement strategy can be an effective way for organizations to track their progress in a given timeframe.

Step 5: Plan approach to market

Before you put your plan into action, plan an approach to the market. This involves determining the appropriate tender process, identifying appropriate pricing mechanism, and deciding the type of contract required for a particular project. Companies can consider the delivery model, nature of the work, risk profile and anticipated timeframe for delivery while deciding the type of contract to ensure high quality and cost-effective outcomes.

Adopting the best-in-class practices in procurement can sometimes be challenging for organizations. If your organization is one of them, request a free demo and let our experts help you in formulating an effective procurement strategy.

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How Following Procurement Best Practices Helped an Automotive Company to Reduce Sourcing Costs by 11% – A SpendEdge’s Success Story

The Business Challenge

The client, a well-established automobile manufacturing company in the US, was facing a number of challenges due to drastic shifts in the global supply chain. Since they were looking to expand their business to new and emerging markets, they wanted more information on the procurement best practices. Developing a suitable business model was a key challenge for the automotive company since these markets were posing challenges related to global trade and finished vehicles logistics fulfillment. This was increasing the need to reduce production costs and excess spend. Their primary aim was to outperform competitors, both in home and emerging markets, by reducing operational costs, increasing efficiency, and following the best practices to meet the regulations of the emerging markets.

Want to know how following procurement best practices can help your business reduce excess spend? Get in touch with our experts now!

Solutions Offered

To address the needs of the client, the experts at SpendEdge identified the procurement best practices for the target region and tailored a plan that would allow them to procure raw materials at the lowest possible price. The analysts at SpendEdge followed a scrupulous research methodology that comprised of primary and secondary research coupled with qualitative and quantitative data collection procedures.

In a span of eight weeks, the automotive manufacturing company was able to successfully lower their sourcing and procurement costs by 11%. Our expertise in analyzing the procurement trends and regulations of international supplier markets further helped the automotive company to improve their relationship with key suppliers and minimize procurement risks. By following the suggested procurement best practices, they were finally able to maintain a healthy relationship with suppliers. The engagement also emphasized on the importance of selecting the right supplier, especially when it comes to ensuring the highest quality, flexibility, and cost efficiency of their supplier networks.

Key Findings

By adhering to the suggested procurement best practices, the client was able to enhance their procurement system and synchronize supply management with demand across business processes. They were also able to evolve from a fixed-cost-driven supply network to a variable-cost-driven value network and streamline information flow from the department level to a global scale. This reduced costs for the automotive company by 11.2%.

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What are the Basic Principles of Procurement Best Practices?

Procurement has become a fundamental enabler of business strategy and a preferred method for achieving sustainable cost reduction for many business entities. It is considered to be the most viable option for process simplification with technology enablement. Therefore, businesses should adopt procurement best practices to realize the full potential of their sourcing process.

While following procurement best practices, the team should strike the right balance between short-term savings opportunities and longer-term transformational opportunities. This provides good traction, better substantial benefits, and supply management for companies. Here are a few procurement best practices that companies should follow:

  • Devise a spend map
  • Engage with a wider organization to reduce costs
  • Ensure supply management and contract management
  • Connect commercial and technical capabilities

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How Can a Cost-effective Strategic Sourcing Process Benefit Companies?

Strategic sourcing process

Even now, many companies consider purchasing to be simple and merely a means to an end. The key aim of any procurement team is to meet the financial requirements while minimizing costs for their organization. Most teams, therefore, pitch competing suppliers against one another to cut purchasing costs. This hardly gives companies any scope to formulate an effective procurement strategy and build goodwill among suppliers. As a result, companies find it challenging to implement a strategic sourcing process and improve their overall purchasing efficiency. Following this traditional purchasing approach results in a lack of visibility, missed opportunities, and cost synergies for businesses. The absence of a strategic sourcing process also hampers the quality of products and negatively impacts the decision-making process.

At SpendEdge, we understand the impact that following a cost-effective strategic sourcing process can have on your business. And to help sustain profitability, our team of experts has highlighted some of the key benefits of following a strategic sourcing process. Though knowing more about the key benefits of a strategic sourcing process can help businesses achieve significant cost-savings, let’s first understand why companies need it and the impact it can have on your business. (more…)

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Top 3 Procurement Challenges and Solutions Companies Need to be Aware of in 2019

The future of supply chains is not just confined to ensuring reduced price and timely delivery of goods. It is dominated by various other factors such as legal issues, sustainability concerns, and regulatory compliances. This creates the need for companies to utilize procurement services that can enhance the speed, efficiency, and accuracy of their processes. Through this article, we’ll discuss what are the major challenges that companies face while procuring goods and services and why they need procurement services providers like SpendEdge.

Why use procurement services? 

Maintaining domain expertise in every category of spend is still an expensive and difficult task for many organizations. Leveraging a procurement service provider can assist companies to conduct a rapid analysis of an organization’s spend, negotiate with suppliers, and avoid the burden of building an effective procurement infrastructure for non-strategic categories.

At SpendEdge, we understand that not every organization can employ a strategic sourcing process and train employees on sourcing automation tactics and category and supply market assessments. Therefore, our team of experts has highlighted some major challenges that companies face while sourcing good/services and have offered viable solutions that procurement services can offer.

Want to leverage the benefits of procurement services for your organization?

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How can procurement services address top supply chain challenges?

Challenge 1: Complex spend

Every year, businesses make millions of purchases that are either too small to be handled or are too infrequent to be included in a single vendor catalog. For most businesses, such categories are sourced manually using internet searches or emails, increasing the complexity of the process.

Solution

By utilizing strategic procurement services, companies can prioritize categories on the basis of market size and product innovations and provide a comprehensive overview of all efficient suppliers in the market. Companies can even employ online procurement solutions to decrease the complexity of spend.

Challenge 2: Risk

Not only big businesses, but mid-market companies are also becoming vulnerable to various strategic and operational risks in their procurement process. They require a holistic risk strategy that can minimize total risk exposure and enhance their supplier risk management.

Solution

Procurement services help companies with risk mitigation investments and risk transfers. They analyze the suppliers before onboarding them and continuously monitor them to improve supply chain visibility and reduce the risks of working with new vendors. Also, procurement services help companies to evaluate the procurement process and manage procurement risks across various business units.

Devising a holistic risk strategy can be a herculean task for many companies. Request a free proposal and know how our portfolio of procurement services can help you successfully mitigate risks.

 

Challenge 3: Information

Companies sticking to traditional methods can never gain a competitive edge in the market. They need their procurement department to be comfortable with advanced data mining and analysis technique in big data to become market leaders.

Solution

Firms offering procurement services possess the capability to analyze data from multiple sources and prioritize business processes. They help companies to recognize the equipment and applications associated with each business process and provide the needed procurement services.

Want to implement advanced techniques for extracting valuable insights from data?  Request a FREE demo below and know how our procurement services can help you.

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What is the Real Reason for Procurement Companies to Leverage Procurement Solutions?

With cost reduction initiatives becoming a top priority in 2019, most stakeholders have started to scrutinize expenditures more carefully. They are finding ways to better manage costs and expenses. According to a recent study, companies waste as much as 30% of their total expenditures. These expenditures are deemed wasteful as they add no value to the customers or companies. Therefore, it becomes imperative for businesses to have an effective procurement system in place so that they can cut the right costs through strategic reductions that don’t impede their ability to remain competitive in their respective marketplace. Strategic procurement can impact the company’s bottom line, but not every business possesses the resources and expertise to optimize their procurement capabilities. 

Some companies find it quite challenging to manage a budget when unexpected costs arise. They lack procurement strategies that can best identify the alternate approaches for them and provide a realistic assessment of risks. This not only increases the entire cost for businesses but also hampers the efficiency of organizations. Therefore, it becomes crucial for companies to leverage procurement solutions to enhance their capabilities.

At SpendEdge, we understand that procurement can be very complex and cost consuming in many large companies. So, our team of experts has highlighted three major objectives that companies should try to achieve while utilizing procurement solutions to thrive in a competitive marketplace.

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4 Tips That Will Help You Ace Energy Procurement

Prices in the energy sector are highly volatile, which makes formulating procurement strategies a difficult task for companies. The energy sector is a broad market consisting of different subsectors. While the range of activities in the energy sector is broad, two distinct features set the energy sector apart from other industries: First, the world’s energy requirements are on the rise and are expected to continue so for a long time to come. Secondly, the growing need for renewable and clean sources of energy has resulted in new regulations and statutory emission requirements to regulate the supply of power from renewable sources. The changing economic landscape has seen many projects being restructured, downsized, suspended, or abandoned altogether. While the energy sector is far from immune from the effect of economic pressures, it benefits from a series of factors, which means that its expansion and further development is assured. Here are four tips for companies to better manage their energy procurement strategies:

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Set the goal

Due to the uncertainties in the energy sector, it is vital that for companies to set the goals of procurement strategy well in advance. Since every business is unique, either due to their tolerance for risk or the budget they have available,  it is essential to tailor the strategy to fit the requirements of each organization. Throughout the procurement stages, these targets can then be referred back to for any clarification.

Market comparison

Though in most businesses loyalty is rewarded by suppliers, it is not the case in the energy sector. Therefore, when it comes to the energy sector, comparing the markets is often the best approach. Also, to avoid increased prices when re-signing contacts with a current supplier, it is advisable to check what other suppliers are offering before making the deal.  Undertaking price comparisons while creating energy procurement strategies will help companies get a broader picture of the market.

Flexible contracts

Though fixed energy contracts can offer several benefits for companies, such as avoiding risk as prices fluctuate, ease of management, and a fixed rate for a fixed contract period, many companies are now turning to a more flexible approach. Flexible price contracts offer businesses a method of procuring energy that helps them to keep them on top of market movements and eliminates the risk of fixing the price during a peak point in the market. Wholesale power can be purchased in smaller amounts, throughout the period of the contract, allowing companies to buy energy at the best times and take advantage of favorable market prices.

Analyze data

It is imperative for every company to have clear-cut data on the energy consumed by them before formulating procurement strategies. This will help businesses gain better insights on the type of energy contract that they require. Companies can resort to energy management software that can help them to monitor consumption patterns and identify potential areas for savings. By analyzing energy consumption data, businesses can also keep track of overconsumption and take corrective action to rectify this.


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An Effective Procurement Strategy is a ‘Bird in Hand’ For Your Business

Procurement is one of the key decision-making areas for business, wonder why? The answer is because it directly impacts an organization’s profitability. Therefore, a cost-effective and optimum procurement strategy is important for the sustainability of business in the long run. So how exactly do you decide on a procurement strategy that suits your business? How do you measure the extent of its effectiveness to your business? What are the things to keep in mind while formulating an effective procurement strategy? Let’s discuss.SE_Demo2

Intelligent Procurement Strategy: Go Digital

Procurement can be a complex process, but thanks to digitization and various digital procurement platforms and solutions, the procurement process is more simplified now. Digital procurement solutions cover the entire procure-to-pay value chain which enables an organization to collect huge amounts of data. This data supplemented by external data provides buyers all the information that they require for sourcing, managing and monitoring the supplier relationship from one end of the procurement value chain to another. However, to make optimum utilization of the enormous data processed with the help of digital procurement, the data must be measurable and should facilitate the procurement managers to analyze the data and draw the right conclusions to forms an optimum procurement strategy.

What Should an Effective Procurement Strategy Measure?

The main aim of procurement solutions is to help the purchasing department to obtain answers to some of the vital questions that are crucial in the company’s operation, in an intuitive and simple manner. So, what are the questions that the procurement department should keep in mind while formulating a procurement strategy?

  • Can the compliance rate of contacts be tracked?
  • How to check if the supplier has honored the terms of the contract
  • What are the payment terms? Are there any benefits associated with early payment terms?
  • Can the company’s data be benchmarked with the market?

Procurement Intelligence: Key to Business Agility

An intelligent procurement strategy and purchase decision give a company the ability to quickly act upon their market conditions and formulate effective business strategies. Systematic analysis of the plethora of data available through digital procurement can be used to formulate the right strategies and easily identify the gaps. Another key importance of digitalization of procurement intelligence to a business is that it gives valuable information on purchases to other departments. It is not just the finance department that benefits from this data, but it can also prove helpful for other departments such as R&D to make product modifications and also marketing and sales or marketing departments to undertake promotional activities.

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Technological Advancements in Consulting Services – Corporate Strategy and Financial Advisory

Organizations are exploring multiple avenues and are constantly increasing their efficiency in a bid to remain competitive in the marketplace. They are constantly taking strategic and tactical decisions to tweak functions within an organization in a quest to become the best. However, it cannot be possible for them to possess information relating all industry verticals and business functions. In addition to that, expertise relating to a particular function can lie outside of the organization. Consulting service providers have emerged onto the scene to help such businesses achieve excellence in every field and assist in their decision-making process. For instance, financial consulting services firms employ specialists who work with the company and provide them with professional advice to manage their financial transactions better. The market for consulting services has currently witnessed growth due to major technological advancements that offer more than just a human expertise.

Innovations in Corporate Strategy Consulting Services MarketCorporate Strategy

  • Portfolio analyzer helps buyers to view a visual representation of their current portfolio and potential portfolio for expansion. This application assists the decision-making process by identifying high-growth and high-profit businesses and suggests the current level of investment in such business units
  • Cloud-based CRM solutions help capture all client interactions and helps identify gaps which assist in discovering business opportunities to accelerate growth. For instance, Adams Consulting increased their business by 60% using CRM software to gain new clients and maintain existing ones
  • Deloitte Consulting and Accenture are using integrated ERP and professional services automation which can provide real-time insights on problems and notify the user instantly, without having consulting services firm to perform repetitive administration tasks. The ERP suite can reduce the cost base by about 50% and invoicing cost by 25-75%

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  • Data analytics is increasingly being used across all business functions, and financial consulting is no exception. Data analytics tools can process the large volumes of data produced by finance departments, and relative insights and findings can be communicated to the clients to formulate financial strategies
  • Financial data is of a very sensitive nature and makes data protection their top priority as a result. Consulting services firms are using advanced cryptography and PKI tools to protect such confidential data
  • Delloite launched iDeal, an integrated system of M&A analytics tools, process, and techniques to extract potential target’s data to deliver real-time insights, which, in turn, increases the efficiency of M&A phase

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Agile Procure to Pay Process – Adopting Digitization to Improve Procurement Efficiency

To ensure profitability and success, organizations undertake procurement processes that help boost efficiency in their operations. In order to operate or manufacture products and services, companies either produce these raw materials and input goods in house or resort to external procurement and purchase it from external third party suppliers and vendors. Procurement to pay or P2P, as it is commonly referred, involves the process of acquiring and managing the raw materials and input goods that are eSE_Analystssential to manufacture the final product. A procure to pay process is a seamless process right from the point of order to the point of payment, assisted by technology. Purchase to pay processes entail a transactional flow of data regarding order placement, order fulfillment, and payment between a supplier and the buyer.

Procure to pay processes automate the purchase process, production, and operations by improving efficiency and price control. The automated software allows the purchaser to acquire raw materials at the pre-defined purchase limits and ensure compliance with the pre-determined budgets. A typical procure to pay process entails requirement planning, vendor selection, obtaining purchase requests, order placement, invoice generation, and vendor payment.

Key to A Successful Procure to Pay Process – Financial Agility

The key to a successful procure to pay process is financial agility,” as it helps organizations to optimize their purchase cycle, reduce operational risks, and increase control over efficient cash management. There are several factors that ensure financial agility within an organization; they are as follows: procure to pay

  • Organizations can become financially agile by integrating supplier base and implementing user-friendly tools, thereby reducing supply overhead costs and facilitating touchless transactions
  • Seamless integration with the Enterprise Resource Planning (ERP) system, thereby automating process flows and business operations to ensure high visibility and data control

To achieve this agility in finance and to optimize procure to pay processes, procurement managers must implement a digital infrastructure to ensure quick business processes. Additionally, businesses must adopt electronic procurement (e-procurement) to improve organizational efficiency and minimize errors. Companies can also explore new technologies like Robotic Process Automation (RPA) and blockchain technology, thereby ensuring a seamless and streamlined procurement cycle.

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Digitalization of Procure to Pay Process

Organizations are moving towards touchless, digital, and streamlined procure to pay process to increase spend visibility and drive profitability. Procurement managers are also focusing on migrating to cloud-based P2P processes for invoice processing and are leveraging mobile technology to gain access to real-time invoice data through mobile devices. Additionally, procurement managers are turning to big data and analytics to have a better visibility of cash management and gain actionable insights that support strategic decision making. A digital procure to pay process has the potential to automate the entire procurement cycle right from order placement to reporting. These digital P2P solutions offer tools to improve visibility, control, and spend management. Digitization in procurement helps the purchase managers to ensure efficient administration, spend control, achieve process efficiency, and facilitates stakeholder collaboration by improving reporting. A digital procure to pay process allows the procurement manager to easily purchase raw materials and shortens delivery cycle time; thereby, reducing processing costs and other overheads. A digital procure to pay system provides the following benefits to procurement managers,

E-Procurement – Transforming The Purchase Function

By adopting e-procurement tools, organizations drive efficiency, minimize errors and eliminate data redundancy in procurement processes. Digital procurement ensures reliable and efficient completion of day-to-day tasks. Companies that adopt cloud-based procurement technology witness a rise in the number of orders over a span of five years, caused by increased efficiency and better customer relationship management. E-procurement entails electronic data interchange, allowing organizations to enhance agility and gain supply chain synergies and adapt operations to changing market dynamics. These tools provide web procurement tools that automatically identify, track, and plan the resource requirements of the organizations and perform procurement functions such as taking quotes and bids.

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RPA and Block Chain Technology Improving the Procure to Pay Process 

Organizations must adopt technology to improve process efficiency and drive profitability. In traditional procurement processes, there are several glitches that increase costs and create process inefficiencies. Until now, businesses follprocure to payowed a tedious invoicing process due to the absence of standardization. The manual purchase order process resulted in organizations following inefficient business practices and data discrepancies; thereby, delaying management approval.

However, robotic process automation and blockchain technology have transformed the landscape of procure to pay process. Robotic Process Automation (RPA) rationalizes invoice processing as robots manage receipt and allocation of invoices. It enables robust monitoring of data through cognitive intelligence to gain actionable insights and study the changing patterns and trends. RPA allows procurement managers to scrutinize data and provides access to standardized portals for storing and updating vendor information, which subsequently ensures quick turnaround time and reduces the process cycle.

On the other hand, blockchain technology drives higher value, eliminates redundant data, reduces transaction errors, and provides access to a wide supplier network. The impact of blockchain technology is higher at end processes that includes payment and invoice processing. A blockchain technology expedites vendor inquiries, supports transparent and real time database access; thereby, streamlining invoice processing and ensuring efficient reconciliation process.

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Leveraging Social Media as Part of the Corporate Procurement Strategy

The growing influence of social media is something which corporates cannot afford to neglect. At the same time, there is a lot of confusion regarding what extent it can help in devising corporate procurement strategies. While there are a couple of challenges which makes it all an ill-fit in the standard procurement cycle, the advantages of adopting it are equally immense. And therefore, we bring you a comprehensive analysis on how procurement strategy can employ social media to its advantage.

Common procurement challenges

Procurement teams usually stick to the traditional tactics of meeting the client’s requirements. Perhaps this is the reason most of them lack the skills of using social media to their advantage. Some of the common challenges which most procurement leaders face are:

  1. Lack of peer connect
  2. Incomplete listing of suppliers
  3. Understanding the external environment
  4. Following best practices

Most procurers just focus on a single media platform, which limits their connection with peers in the same area of work. And, the issue is not just with limited connect with the peers, but focusing on one platform cramps up the supplier listing as well. With restricted list of suppliers, it becomes a challenge to procure in the most cost-effective manner.

Understanding the external environment is a critical aspect in managing social media. This helps in connecting and reaching out to the most appropriate target group. Often procurement teams fail to understand the external environment and leverage the medium to the brand’s advantage.

Lastly, contrary to popular belief, social media has some unwritten rules and best practices to be followed. Going wrong with social is a sure shot recipe for disaster – something which no corporate is looking for.

How to use social media to your advantage?

The simple rule of making the best out of social media is to stick to the basics, and then start innovating. When it comes to procurement, the first step is to engage the suppliers in an effective manner. The informal environment of social media makes it easier to engage with suppliers in a smooth manner by promoting open dialogue. Building good relations with the suppliers not only enables better procurement strategy, but it also improves the overall image and goodwill of the organization.

Secondly, social media has emerged as the source of all the latest news and updates. Procurers can gain access to all the real-time information about suppliers and market trends directly from these platforms. Not being active on it would mean your company is losing out on a free information highway.

Lastly, no other platform makes knowledge sharing so uncomplicated as social media. Procurement is one area which needs innovative ideas at regular intervals. Getting ideas from peers is perhaps the best possible way to keep one’s innovation skills sharp and sound.

SpendEdge’s take on Social Media

Improvising and reinventing are the two essential features of any foolproof procurement strategy. And as we see it, nothing speaks about innovation and improvisation the way social media does. Our experts on spend and supply chain management have repeatedly emphasized the power of social media  in increasing visibility, and advocate the inclusion of this one element in the procurement process to provide an added advantage to category managers.

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