Category Management

Traditionally, there were two bastions of category management. These were the retail and automotive sectors. In the retail sector it has been common to find specialists in fashion buying, food buying, white goods buying and furnishings. The accountability placed upon these specialists included sourcing products, forecasting demand, negotiating prices and other facets of the deal, monitoring sales and often accountable for the merchandising and managing of stock. If unsold stock remained at the end of a season, the buyer was accountable for mark-downs. The watchword was profit, accompanied by customer satisfaction. The other area often with category management has been automotive. Buyers would have specific responsibilities for power train, engine, fasteners, wiring assemblies and so on.

So what sets category management apart from other forms of buying? It is the requirement that buyers will be expert in their narrow area of expertise. That includes a technical requirement as well as commercial and contractual understanding. Category management has now become fashionable in many sectors, sometimes ill thought through. It simply isn’t enough to appoint category managers.

The exacting accountability that should accompany the responsibility needs thinking through. A good example is a large financial institution deciding that one of the buyers would become the category manager for IT software. The principle is very sound, until all the considerations are give due weighting. Can the newly appointed category manager acquire the relevant technical knowledge to hold their own with IT software specialists in the organization and with expert software suppliers? It is most unlikely unless very specific training and development takes place. Similarly, a retail organization decided that they would have a category manager for all Facilities Management.

The scope of these responsibilities included, cleaning, security, front office reception, courier services, maintenance and repair and renting surplus building space. This scope would be demanding of a general facilities management operator, let alone a buyer new to many of these areas.

Category management usually gets one chance in five years to make it work properly. If it fails, the procurement discipline will lose face and credibility. It requires a disciplined review of the objectives and strategy for category management and a very careful selection process that leads to the appointment of the category manager. We have a well developed methodology to identify the goods and services that lend themselves to category management, and a methodology to work with Human Relations to select those people who will succeed.

When category management is successful there will be many deliverables that contribute to business success. Getting value for money, reducing risk, identifying cost drivers, ensuring the right contracts are in place, forming excellent supplier relationships and reducing the time spent on problem solving are all possible. If you already have category management in place we can help in two distinct areas. These are reviewing the achievements and identifying gaps in performance. The other area is in providing learning and development, usually, on-the-job, to deliver additional benefits, using world-class practice.