Strategic Procurement: Category Management
Category Management is a ‘strategic approach which organises procurement resources to focus on specific areas of spend. This enables category managers to focus their time and conduct in-depth market analysis to fully leverage their procurement decisions on behalf of the whole organisation.’ (The Chartered Institute of Procurement & Supply).
RELATED POST : THE TENDERING PROCESS
Adoption of a formal Category Management Process delivers the following benefits:
How can you move your organisation towards a Category Management approach?
Stage 1: Planning
Robust planning gives you a framework for an initial category outline and engagement. Useful outputs from this stage are a category charter, stakeholder analysis, a vision statement, and market analysis.
The category charter is a statement of the scope, objectives, and the stakeholders engaged in the management of the category. It provides a high-level overview of their responsibilities and outlines the category objectives. It also defines the role of the category manager(s). The Category Charter is a reference point for the ongoing development and evaluation of the category.
Stakeholder analysis is simply the analysis of “who’s who”, what their interest in the category may be and whether they are likely to be supportive or have other perspectives upon the category. By identifying those with whom you need to communicate, and their preferred style, you will be able to manage stakeholder perceptions and expectations throughout the process of change, and secure their support. An appreciation of different viewpoints also helps with analysis of options, and identification of less obvious critical success factors.
A vision statement expresses the desired future state that the category must have in place to fully satisfy the defined and agreed business needs. This is a useful summary tool which can be used to re-check that all stakeholders have the same end-goal in mind.
Market analysis enables you to formulate a strategy on how to develop your category. It studies the attractiveness and the dynamics of a services or goods market within a specified industry. By understanding the key drivers of your market, you can identify competitive and commercial advantages. There are many different aspects to a detailed market analysis, but some examples are:
Stage 2: Optioneering
More detailed optioneering builds on the preferred outputs from Stage 1. The purpose of the optioneering stage, is to fully engage the business areas impacted by the category plan, ensuring the resources required are fully mobilised, and engaged with delivering the category vision based on agreement to a detailed plan – a plan designed to deliver some ‘big rocks’ (i.e. the most critical deliverables).
Once optioneering has been exhausted, a road map should be produced, containing the key steps along the journey towards the category vision. This details the pathway towards the desired future state, showing what must be in place to fully satisfy the business needs.
Stage 3: Execution
In the final stage you will work through the agreed plan developed during the planning and optioneering stages. Clear and regular reporting on progress to the plan, and demonstration of the business value being created, is critical to success.
The project will most likely have a number of interdependent workstream. A mobilisation plan is a simple way to summarise each workstreams scope, the responsibilities of that team and the governance in operation. It provides a high-level overview for stakeholders to understand the responsibilities of each workstream whilst defining the roles for each project team member. To enable the monitoring and measurement of outcomes, a simple template describing the key business outcomes targeted by each workstream over a relevant timescale, is also a useful tool.
In addition, a financial plan should be completed so that everybody understands the business value being created and the impact it will have on budgets across the business. By understanding where and when benefits will be delivered you can engage stakeholders to commit the required levels of resource to deliver the targeted outcomes.
Stage 4: Evaluation
You can evaluate the success of your category plan against the following three statements:
- The way your business works has changed as a result of your category plan, so much so your CEO would recognise the value added; ‘big rocks’ have been delivered
- Key internal stakeholders talk openly about how your plan has helped them achieve their business goals (not just your savings targets)
- Your business has changed, making it easier for your suppliers to add value, and this value is recognised in ways other than a reduction in the supplier’s invoice pricing
Finally, don’t expect results overnight; a good category plan takes time to develop. The key to success is the relationships you establish both internally and externally to your organisation. Allocate enough time to develop your plan, and the relationships necessary to successfully implement it. If you don’t drive through the ‘big rocks’, then this time next year, you’ll still be ‘sifting sand’.
(Big Rocks time management theory taken from ‘The 7 Habits of Highly Effective People’ by Stephen R Covey)