Feb 14, 2017

Understanding Category Management better - with the help of an old Pink Floyd album!

I’m a big fan of classic rock. And one of my favorite albums of all time is Pink Floyd’s Dark Side of the Moon. It’s unique, experimental, surreal and made a major impact on the culture of its time. When I was working in Procurement, I always thought it was ironic to listen to the stand-out hit from the album: Money. The song is critical of consumerism and an obsession with cash. This feels ironic when you’re working in Procurement and pouring effort into getting savings. This also echoes the perception of Procurement within many companies: cost-killers that should be avoided at all price as they hinder business.

But Procurement is changing fast. We are thinking less about money and more about value for money. This explains fresh interest in Category Management. This is because all the spend, all the internal customers, all suppliers are not the same. They require specific approaches and activities. To go back to Pink Floyd’s Dark Side of the Moon, you’ll see a prism with a rainbow coming out of it on the cover artwork. This is actually a really apt way of looking at Category Management. Category Management is about looking at spend through the prism of:

  • Company strategy
  • Internal customers’ needs (stakeholders)
  • Supplier/supply market

And what you get out at the end is more value than what you put in.

Each represents a lens that will highlight what Procurement should be focusing on. Some areas of the spend are very critical, so the view will be very detailed and precise:

  • Categories and sub-categories,
  • Value drivers (TCO, risks, innovation, etc.)
  • Required suppliers’ capabilities
  • Supply assurance

Some other areas don't need too much attention and require a focus on price only.

There are many factors to take into account to define the right strategies at category level. It is vital that strategies are translated into actions. Actions are what will bring results. So, Procurement organizations have to embed these strategies in all their activities. This is only possible when the whole system (people, process, and tools) is aligned and continuously in sync.

To break this down into simple steps, I have developed a checklist to help you:

  • Understand the key components of Category Management
  • Benchmark your practice
  • Boost your capabilities

Download it here!

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