The key in category management is creating and executing category strategies.
Each company may have its own process for creating category strategies, but typically, strategy work includes data collection, data analysis, planning and implementing the planned actions.
This may sound like a simple process, but it is more challenging than it sounds. According to a recent study by Henley Business School, as much as 68 % of the revenue and stakeholder value identified by category management remains unrealized.
A typical challenge that companies face is the lack of in-depth insights into spend and supplier data.
This challenge is due to the fact that many companies operate in a system environment with multiple ERPs and other solutions. Spend data may be dispersed and non-harmonized. There could be several vendor masters and product taxonomies in use. In this case, it takes a lot of time and manual effort to come up with the baseline spend and information on the suppliers for a given category. Offline tools including spreadsheets and presentations are commonly used across the category teams.
Secondly, there might be different practices across the category teams to come up with the strategy. The common template might be missing, which means that each team has its own interpretation of how the strategy should be done. Companies have tried to tackle this challenge by conducting company-wide projects that aim to introduce and implement a uniform process, a common set of tools and a systematic way for category management. This however involves a lot of change management and learning new ways of doing things not just in category teams but across stakeholders as well.
Finally, to achieve the planned outcomes, the strategy needs to be put into action and implemented effectively. Here, the challenge is that often, category plans need to be executed by people outside procurement. As an example, there might be a strategy in a chemical category to switch to an alternative chemical to reduce costs. Implementation of this strategy involves trial runs and tests that are run in production or in research centers. The category manager’s job is to monitor and report on the progress, and at the end, calculate the outcome. With little if any digital collaboration, tracking progress is not easy and takes a lot of time.
To uncover the client’s pain points in the area of category management, the following questions might help with the discussion. What prevents your company from reaping the full value of category management? How efficiently are category teams creating and executing category strategies in your company today?