The global supply markets have become increasingly complex, and business needs are changing rapidly. To navigate successfully in the era of constant change, companies must manage their purchasing spend in a strategic manner.
A typical manufacturing company allocates approximately 60-80 percent of its revenue towards acquiring goods, components, raw materials, and services. Likewise, a typical service company spends slightly less but still dedicates 40-60 percent of its revenue to purchasing expenses.
The implementation of category management in purchasing enables companies to efficiently and strategically handle the wide array of services, goods, raw materials, and components they acquire. This is crucial because the management of external spending greatly impacts a company's profitability, and not all spending can be handled in the same manner.
Category management is a strategic process of managing goods and services of related spend with the objective of aligning the business goals and requirements with market supply.
By implementing category management, the procurement function can have a significant impact on achieving the below business outcomes.
- Cost Savings
- Sustainability
- Stakeholder satisfaction
- Reduced Risk
- Innovation