Why Your Business Needs a Category Management Plan!

Category Management Plan

Businesses must be aware of several factors to remain competitive in today’s volatile market. A solid procurement strategy can help streamline and refine purchase decisions, ultimately improving the bottom line. A sound procurement strategy includes category management and a category management plan.

Organizations need to invest in appropriate resources if they want to gain a complete understanding of their supply chains, identify opportunities, make informed decisions, and get the best possible results. The best category management practices can assess the supply market, evaluate supplier options, and monitor supplier performance.

It all depends on the process you choose to achieve your brand’s goals, which will be the key to your success. Your process will make you stand out and establish your brand as a true leader.

In a 2022 Economist Impact survey, 42% of procurement professionals even listed category management among the top three motivators for digital procurement adoption.

The article will take a closer look at the importance of category management in procurement operations, how it can benefit your organization, and why you need a category management plan now more than ever before.

Effective Category Planning

The success of procurement depends on a category management plan, which is a guideline for how organizations will achieve their goals

A category management plan is a long-term strategy based on an assessment of the organization’s spending as well as the needs of its stakeholders. It includes scheduling, purchasing priority, and resourcing. It is a tool that can be used to influence sourcing strategies or contract management initiatives. The plan must be aligned and developed with key stakeholders.

Now, let’s see what the top benefits of category management planning are that can help your business grow.

Improve Relationships with Suppliers

Category management allows for better communication between suppliers and retailers. You can achieve this by bringing together your factual information, also known as performance data and limitations, and shared category roles and strategies.

Let’s take your product categories as an example. When deciding which product categories to offer customers in-store, try to assign specific strategies, roles, and tactics to each. You have objectives that you want to reach but so do your suppliers.

Suppliers will have plans to accomplish the desired goals for the category. You can align with your needs by incorporating factual data but also agree on which SKUs will fall under the category based on your performance data.

This knowledge can be a key to increasing profitability. It also increases the availability of the right products at the right time and place.

Improved Spending Insights

If done right, category management can lead to you rethinking your sales strategy and you might even get drawn to the idea of hiring a sales development team to help you better manage leads.

Most of the time, if a category isn’t owned by anyone, it’s difficult to provide accurate information about the spending as no one knows the details of the contracts. It’s impossible to know the full list of suppliers, therefore it is difficult to estimate the extent of spending. This can help facilitate a better understanding of spending concerning both existing and future contracts.

Category management is a parallel process that forms the basis for successful initiatives in strategic sourcing. This is possible only if it is done well and with the right level of attention. The company must take the necessary steps to develop and train its employees to be competent managers of their category. 

Minimize Unnecessary Costs Around Data Errors

It is crucial to be able to identify the source of your data to determine if it is reliable and accurate. Data can be corrupted when you extract and transform it for analysis. You could also miss it when you need it.

This scenario can lead to lost revenue or poor customer experience. By merging these data sources into one source of truth, and organizing products into logical categories, you can draw and analyze data specific to a grouping to make business decisions that are reliable and can be trusted to be executed with confidence. In addition, it reduces customer dissatisfaction and the cost of lost sales.

Greater Client Satisfaction

A category manager is responsible for the category management and all aspects of a contract or service, including sourcing requirements, soliciting bids, and negotiating contracts. This allows business people to focus on their job and provide value-based services that satisfy clients’ needs and wants.

More Value from Vendors

A functional category management plan will help you gain a better understanding of your vendors and ensure that you are working with suppliers and vendors in the best possible way. You can also use it to refine your contracts so that you get the best value from your vendors.

Final Thoughts

Although there are many benefits to category management and planning, they all have a shared goal—to increase your company’s bottom line by reducing costs. Category management can also consolidate purchases, strengthen vendor relationships, and maximize the use of resources.

It is a continuous process that forms the foundation for effective strategic sourcing. This can only be achieved if the process is planned and managed well and given the appropriate attention.

Category Management Plan article and permission to publish here provided by Paul Williamson. Originally written for Supply Chain Game Changer and published on April 28, 2023.

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