Category Management Plan
For procurement teams, processing day-to-day transactions without a plan could lead to higher spends. Organisations that have no clear procurement goals or are reactive in nature rob themselves of the opportunity to get the best value out of their controllable spend.
This is where Category Management comes in. Purchasing Category Management enables organisations to manage spend, realise larger savings and foster stronger relationships with suppliers. This strategic approach entails taking a proactive stance in purchasing and setting clear procurement goals to maximise value for every purchasing activity.
By categorising historical spend, organisations can organise their procurement resources to focus on specific areas of spends.
Effective Category Planning
A Category Plan is essential to the success of procurement category management. It serves as a roadmap on how organisations will implement and achieve the goals of category management.
A Category Plan is a long-term plan based on a high-level assessment of an organisation’s spend and its stakeholders’ requirements. The plan includes purchasing prioritisation, resourcing and scheduling. As a tool used to influence sourcing strategies and contract management initiatives, it must be aligned with business objectives and developed with key stakeholders.
Creating an effective category plan starts with implementing category diagnostics. This involves the creation of a category profile and market research.
Developing a category profile includes creating the following:
- category per scope and use
- spend profile per category
- demand profile that outlines your business’ needs with future forecast
- cost profile
- stakeholder profile
For market intelligence, a business has to develop the following:
- Supplier profile complete with the vendor’s characteristics, size, capacity, performance and the risks they potentially introduce to the organisation.
- A market profile that includes a market overview of the organisation’s demand and supply situation, market growth, trends, future outlooks and opportunities.
The category diagnostics enables organisations to obtain a clearer view of the organisation’s current and future needs as well as a sound understanding of supply market conditions. With a thorough category diagnostics, organisations put up a strong foundation for category planning and category management.
Category planning continues category diagnostics in that it starts by defining the organisation’s current state. From looking at the current contracts to finding ways to resolve issues in the supply chain, every P2P aspect and player has to be reviewed. This involves looking at recent and ongoing projects, analysing their impact on the business, analysing risks and reviewing opportunities identified in the diagnostics stage.
From this point, organisations can start setting directions for every category. To set practical and strategic objectives, organisations have to look at every stakeholder’s goals and identify gaps from the current state. From the identified activities, the organisation has to decide on which to prioritise and which activities fall under short, medium or long- term plans.
The rest is downstream but still as crucial. Using a template, an organisation must finalise the category plan and communicate it effectively to stakeholders. Stakeholder understanding and acceptance must be ensured to maximise category management’s potential for success.
It is also crucial to note that category planning does not end with implementation. Plans have to be reviewed periodically to accommodate new business goals and remove obsolete objectives. The performance of every category level, the suppliers and that of the organisation, must be tracked for future revisions of the plan.
Why Aren’t All Businesses Doing Category Planning?
If category management and category planning are so advantageous, why aren’t businesses using them?
The short answer is it’s difficult.
Aligning procurement with business objectives and crucial stakeholder objective takes time. Senior members of a procurement team and senior stakeholders have to be willing to agree on activities and whose needs have to be prioritised.
It is also difficult to gather and clean the data needed for organisations that have disparate procurement systems. When figures do not agree, validating and classifying information can be highly problematic.
To add to the complication, not all organisations have the skill or the resources to make an accurate forecast of future needs, possible changes that can affect the market, and the potential risks associated with every activity.
How Mutual Marketplace Can Help You Start a Category Plan
Mutual Marketplace offers skill and expertise across all areas of spend in the cooperative financial institution sector. From defining categories to plotting the plan in a template, our procurement specialists will support your organisation throughout the entire category planning process.
Category Planning Sessions
Mutual Marketplace is your partner in every sense of the word. We are diligent in understanding your organisation’s strategies, objectives, plans and priorities. From there, we help you define your categories, particularly the ones with the highest spend, the highest savings potential and the ones with the least or highest return on investments.
Category Planning Tools
We have tools that improve procurement visibility, easing the collection of data for analysing spend. We also have tools for reviewing supplier performance to determine the organisation’s core preferred suppliers. For plotting out the category plan, we provide a customisable template for categories that can be easily modified for better reflection of your organisation’s spending behaviour.
Having experts in procurement, category management and commercial and financial law, we can give you an integrated approach in creating category plans that are linked to your organisation’s capacity and procurement strategies.
Together, we can create sourcing strategies and long-term plans that will manage your organisation’s spend, aligned with your organisation’s objectives and mindful of individual supply chain dynamics.
Why Mutual Marketplace?
Mutual Marketplace offers industry best practices, advanced technologies and a diverse team of dedicated procurement specialists. Jointly owned by People’s Choice Credit Union and Credit Union Australia, Mutual Marketplace has specialist expertise in the mutuals sector. As we are purely aligned with the credit union and mutuals industry, we give you the opportunity to leverage GST discounts that are inaccessible with other procurement service organisations.
Boost Your Organisation’s Profitability
The advantages of category management and category planning are diverse but all lead to one end goal: boosting your organisation’s bottom line through reduced costs. If you want to know more about our category planning approach, we can discuss this with you at your convenience. We look forward to hearing from you.