7 min read
Category management processes don’t have to be complicated to be effective. You may have seen 8 or even 10 step procurement cycles in the past. How would you like to simplify your own process to just 4 key steps with help from a true procurement expert?
In episode 551 of the Art of Procurement podcast, host Philip Ideson and guest Stephane Morel, a seasoned procurement expert leading Strategic Procurement Processes at Novartis, discuss the essential steps of category management. The discussion focuses on the evolving role of category management in modern day procurement.
One of the key highlights from the discussion is a 4-step procurement process Stephane has developed at Novartis around 4 A’s. Let’s go through what they are and what you can adapt from the A’s in your own category strategy.
Before we start, a few words on the importance of well-defined processes in category management.
Why processes are important in category management
Let’s be honest. Procurement professionals love to define and follow processes. Processes give us structure and consistency to manage key tasks across the organization. Processes help us explain the best ways of working. Processes simply help us keep things on track.
Many popular procurement processes relate to procure-to-pay activities, but standard processes have also found their way into strategic activities including category management.
A typical category management process involves organizing procurement activities into specific groups of related products or services, and then systematically managing them to achieve more efficiency and business value. A clearly defined category management process can help category managers align with internal stakeholders and improve cost, quality and delivery performance.
In category management, processes offer a number of benefits:
- Consistency: Processes help us define how category management tasks should be handled. The upside of this is that things are more predictable and we can share best practices across and between organizations.
- Efficiency: Even in category management there are many repetitive tasks. Well-defined processes help us streamline operations, reduce redundancy, and simply save time.
- Compliance: Processes help us ensure that procurement activities comply with company policies. In category management this can help us keep to key development goals, such as enabling sustainable sourcing.
- Measurability: With established processes, it becomes easier to measure performance. Holding yourself accountable to results is a lighter lift when processes are followed consistently.
At Novartis, they have made the analysis of business processes an art form. Across the whole organization, Novartis has mapped over 700 different business processes for improvement opportunities. To bring more consistency to procurement operations, Stephane’s team has defined a simple procurement process to support the digitization of category management consisting of 4 A’s.
Let’s go through them one-by-one and consider what they can do to elevate your own category management processes.
4 A’s of the Novartis Category Management Process
- Align to business objectives
- Accelerate procurement processes
- Alleviate operational burdens in procurement operations
- Advance procurement automation
1. Align to business objectives
The first A in the Novartis category management process is alignment to business objectives. As you can imagine, alignment in procurement goes beyond mere cooperation between departments. it’s about creating a ‘flow state’ where procurement and business objectives complement and enhance each other.
According to Stephane “Many category managers have been doing a very light category management approach. Basically, they have been doing work similar to the first three steps of the typical seven steps of a strategic sourcing process from Kearney. It’s not enough.”
Four ways you can align to business objectives
To achieve the kind of alignment Stephane describes, you should align category management objectives with your company’s strategic objectives. Here’s a few ways to get started:
- Strategic inclusion: Involve procurement leaders in strategic planning sessions at the highest level, for example, through a category council or during the budget cycle.
- Communication: Speak the language of the business when communicating with other functions. Aim to understand the goals, perspectives, and performance metrics of stakeholders in different teams.
- Joint objectives: Develop shared KPIs that reflect both procurement efficiencies and desired business outcomes. Aim to look beyond the traditional focus on cost savings and see if you can improve supplier performance or company sustainability in different ways.
- Success stories: Sometimes you just need to sell the vision. Highlight and communicate the wins where procurement alignment has clearly contributed to strategic business goals.
Remember, for category managers, alignment is not a one-time exercise. You need to consistently act as one team with your key stakeholders.
2: Accelerate procurement processes
The second step of the Novartis category management process involves acceleration of core procurement processes.
Use speed as a strategic asset
In a world where market conditions fluctuate and unexpected risks can disrupt supply, speed is a superpower. Stephane Morel underscores the importance of acceleration in procurement at Novartis, where increasing the speed of operations has been crucial to staying competitive.
Practical steps to accelerate category management
It’s easy to say you want to do things faster. It’s a different matter to actually deliver faster processes in a global supply chain without increasing risk. Here are a few ways you could increase speed in your category management activities:
- Streamline approvals: Review and streamline your procurement approval workflows. Eliminate unnecessary steps and simplify the procedures. If you have the means, consider automating non-strategic approvals entirely.
- Leverage technology: Invest in technology solutions that speed up procurement tasks. Stephane highlights the integration of digital tools in accelerating data analysis and decision-making at Novartis.
- Empower decision-making: De-centralize procurement decision-making where it makes sense. With the right criteria local teams can make decisions faster themselves.
- Continuous training: A well-informed team can make quicker, more effective decisions. Keep your team up-to-speed with regular training on best practices and new technologies.
These are just a few examples. Simple actions can quickly stack up to increase speed-to-action. It can be a combination of things that make category management more responsive to changing market conditions.
3. Alleviate operational burdens in procurement
As the third step in the Novartis category management process, Stephane Morel stresses the importance of alleviating the operational burdens that often bog down procurement departments.
Bring on digital capabilities
One practical example of operational burdens Stephane mentions is that many category management tasks are still managed in Sharepoint and Powerpoint. Today, there is an ecosystem of different procurement tools that can streamline or automate some of the key tasks.
Ways to streamline and simplify without fancy tools
You can’t always find a tool to fix your operational challenges. To alleviate category management burdens, consider implementing some of these other proven methods:
- Redesign processes: Examine existing procurement processes critically and look where they can be simplified. Look for steps that can be combined or eliminated and policies that can be updated to reflect current needs more accurately.
- Go lean: Apply lean management techniques to procurement to eliminate waste in all forms, whether it be time, resources, or effort. If you want to trim operations, go lean.
- Double down on supplier collaboration: Sometimes less is more when it comes to supplier management. Develop closer collaborations with key suppliers to simplify negotiation and contracting processes.
Through these approaches, you can reduce the complexity within your category management framework. The change doesn’t have to happen overnight, but even simple changes can reduce operational burden.
4. Advance automation in procurement
Morel envisions a category management process that relies more on automated insights and actions. “Imagine all the important and the urgent changes, updates, or impacts on a market or suppliers could just pop up automatically. You receive on a daily basis or whatsoever these pop-ups so you can see if it’s important for you or not.”
The role of artificial intelligence in automation
Morel goes deeper, describing the potential of artificial intelligence in the automation of category management “Obviously you make much better automatic recommendations of strategic options based on AI. For me, when I am talking about AI or machine learning or whatever, the whole tech platform will really leverage the collective knowledge of all the companies, all the category strategies they have in the tool, so we could benefit from all this knowledge. That would be absolutely fantastic.”
Implement automation for strategic gain
Here are some actionable steps you can take to advance automation in your procurement processes:
- Identify automation opportunities: Review your procurement processes to identify areas where automation can have the highest impact. Prioritize tasks that are repetitive and time-consuming.
- Choose the right tools: Select automation tools that integrate well with your existing systems and that are scalable to your needs. Ideally tools should not only automate but also provide analytics and reporting capabilities.
- Train your team: Ensure everyone is trained and comfortable with the new technologies. Your team’s ability to leverage tools plays a big part in the success of your automation efforts.
- Monitor and optimize: Automation is not a one-off exercise. Continuously monitor the performance of automated systems and make adjustments as needed.
By integrating these automation strategies, your procurement function can become more efficient and strategically aligned with the organization’s long-term goals.
Key takeaways for building a category management process
Category management processes don’t need to be complicated to be effective. At Novartis, category management processes have been distilled down to the four key A’s of align, accelerate, alleviate, and automate.
You don’t have to take such a streamlined approach, but you can learn a lot from the pragmatic and data-driven methods employed by Stephane and his team. To get a full picture, revisit episode 551 and hear all the pragmatic advice you can use to build your own processes.
