“Will category management, under its current guise, ever get mainstream adoption? If it doesn’t, is procurement destined to be a reactive and largely transactional function?” – Philip Ideson, Founder & Managing Director at Art of Procurement
If your procurement organization has implemented category management before and it didn’t go as well as expected, statistics show you’re not alone. Earlier this year, I spoke with Mark Webb, Managing Director at Future Purchasing, and he shared a few sobering data points that illustrate some of the biggest challenges with category management.
First off, the average category strategy takes a whopping 42 weeks just to create, not even implement. Second, 86 percent of stakeholders do not understand their role in category management, which makes it very difficult for category managers to involve these stakeholders in their pursuit of maximum value. And third, only 30 percent of organizations that have implemented category management reports actually have the resources or the technical skills they need to execute them effectively.
Considering these factors led me to a question: will category management, the way it is currently structured in most organizations, ever actually achieve mainstream adoption?
For the sake of procurement’s long-term success and strategic role in the business, hopefully the answer is ‘yes,’ but I also think there are some key tactics and processes we should consider adopting to strengthen the category management model.
1. Adopt a nuanced approach to where and how you deploy category management
One size doesn’t fit all when it comes to category management, and procurement has to carefully evaluate which categories are best suited for each management approach. This will allow them to optimize their resources, think more strategically, and focus on areas where category management can drive the most value.
Consider taking a look at the following areas:
- Identify categories suitable for tail spend models: Some categories might be better managed through autonomous sourcing, self-guided buying, or outsourced tail spend solutions. These approaches can help streamline processes for low-value, high-volume purchases.
- Leverage GPOs or distributors: For certain categories, partnering with Group Purchasing Organizations or distributors might be more effective than managing them internally.
- Focus on strategic categories: Identify the categories that are most crucial to the business and offer a competitive advantage. These are the ideal candidates for comprehensive category management, whether through internal resources, outsourcing, or a hybrid model using fractional resources, micro consulting or managed services.
2. Align your rollout with the business
Category management must be fully aligned with the rest of the business at every stage for it to truly succeed. This isn’t just a one-and-done effort, either; it’s an ongoing process that requires continuous check-ins and adjustments. For more insight in how to accomplish this, see our concept of “Procurement Inc.,” which breaks down the model of operating procurement as a business within a business by placing alignment at the heart of the procurement function.
3. Invest in catalysts and changemakers
The success of any category management program largely depends on the people driving it. Procurement should develop and recruit category leaders who possess traditional procurement skills but who also have broad commercial acumen that goes beyond negotiating a good deal.
The best category managers are relationship-builders who can create strong connections across the business and help overcome that 86 percent deficit of stakeholders who don’t quite understand how category management works and what their role in its success should look like.
Category managers should also be good storytellers who are capable of articulating the value of procurement to different stakeholders. This can go a long way to helping to drive the cultural and operational shifts necessary for widespread and successful category management implementation.
4. Decouple category management from full-service buyers
Category management should be a core strategic focus, not a “Friday afternoon activity” squeezed in when there’s not much else going on. If resource constraints prevent you from establishing a full-fledged category management function, start small. Focus on a few key categories where you can dedicate resources to strategic planning and execution. It’s better to achieve success in a limited scope than to spread your efforts too thin across multiple categories.
5. Leverage AI and automation
Generative AI and automation have given us new opportunities to enhance category management, including access to data-driven insights, the ability to streamline processes and drive more efficiencies, and – not to be overlooked – new ways to enable better stakeholder collaboration and gain broad organizational support.
Lessons From the Past
My first procurement role nearly 25 years ago was in category management for a large automotive company. I was responsible, not for the day-to-day sourcing or the operational blocking and tackling, but for the larger strategies surrounding my category.
Balancing cost with flexibility and risk mitigation, I had to think about how to leverage our supply chains to make the end products more competitive. We were successful because of the strong relationships we built across the team, which allowed us to leverage the internal subject matter expertise, along with our suppliers, that we needed at exactly the right time to disrupt the market and generate meaningful savings for the business.
That experience demonstrated just how important category management could be in shaping procurement’s role in the business, not as a tactical administrator but as a key strategic business partner helping to drive bottom-line results.
All these years later, I still believe that category management can be the future of procurement. And yet, category management still struggles to achieve the kind of status, understanding, and role in the business it needs to ensure its relevance and impact, especially against an increasingly automated environment.
It might be long overdue, but there’s no time like the present to tackle head-on some of the biggest roadblocks holding category management back and try to think of new, more effective ways we can solidify its position as a core strategic function and value driver.
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Links & Resources
- Subscribe to This Week in Procurement
- Philip Ideson on LinkedIn
- Category Management: How Far We’ve Come, How Far We Can Go featuring Mark Webb
- What is Category Management? (According to the Experts)
- Build Your Category Management Framework with Five Evergreen Principles
- Learn from the 4-step Category Management Process Refined by Novartis
