Category management

This is an editable presentation of Category Management in procurement. The presentation explains the ways of creating categories and provides several examples of category creation in different businesses. It also gives the main pros and cons of category management.
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2. Category Management Zoran Kecman, MCIPS 25 th July 2020.

3. What are we going to talk about today

4. History Category management originated in Marketing in the 1980-s In the following years automotive industry procurement teams started to use the concept Definition Categories – general families of purchased product or service ( Monzka et all.,pg195, 2009) CIPS definition: Category Management is a strategic approach to procurement where organisations segment their spend into areas which contain similar or related products enabling focus opportunities for consolidation and efficiency.

5. Creating categories Similar products / services: Construction materials IT Transportation Grains How the products/services are used in the business Directs – main materials Indirect By Geography Regional procurement team Matrix teams

6. Using Kraljic to create categories A separate category manager for one item One CM could cover several groups

7. Pros Better sourcing plan by category Specialization allows for better knowledge about the market Provides significant improvement in case of multi-location businesses Cons Creating categories takes time and it is difficult to change later Silos effect – lack of cooperation between category teams, reducing potential synergies Relatively difficult to hire category managers and difficult to switch jobs Pros and cons for Category Management

8. Example 1 (a construction company) Classic categories: Building materials MEP materials Subcontractors civil work Subcontractors interior Hired labor Transportation, food, accommodation Office & IT

9. Example 2 (a grain processing plant)

10. Example 3 Catering

11. Example 4 Category manager takes care of the complete S-2-P cycle for his category: NEED - SOURCE – CONTRACT – PROCURE - PAY

12. Key Takeaways

13. Thank You