Category Management Process
Category Management identifies opportunities for organisations to lower purchase costs, foster mutually beneficial relationships with vendors and minimise risk.
At its very core, Category Management is a proactive approach to procurement. It looks at the types of items procured by various units in an organisation and bundles the similar products into a single contract.
When approaching vendors with a bigger contract, organisations purchase items more effectively and obtain significant savings from the lowered unit price. Buying items in bulk allows the procurement team to reduce the number of purchases within a given period resulting in more savings with less working capital needed.
Three Phases towards Bigger Savings and Better Efficiency
There is no standard category management process, but here in Mutual Marketplace, our process is distributed into three phases:
1. Category Planning
This is our analysis and diagnostics phase. It entails understanding the business, the individual goals of key stakeholders and how much the organisation is spending on procurement. We help institutions identify categories and identify which categories have the highest spend, the highest savings potential and the ones with the least or highest return on investment. We also help organisations understand the supplier market’s capabilities to identify suppliers or methods to better address internal needs. From there, we provide a template for you to communicate your category plan to the rest of your organisation.
2. Category Management
Category management is where we help you implement the strategies we’ve formulated in the category planning phase. We’ll help you screen suppliers, shape and negotiate proposals as well as draft contracts for better supplier performance and less contract risk. To ensure that your relationship with your supplier continues to add value to your business, we help with managing sourcing, suppliers and contracts. In terms of internal controls, we help with the management of organisation demand and consumption to optimise the use of resources and emphasise what needs to be prioritised.
3. Category Development
Category management does not end with implementation. At Mutual Marketplace, continuous improvement is part of strategies and processes. We help partners implement an updated and compliant procurement process monitoring the performance of every category for further enhancement of the category plan.
From Reactive to Proactive and Optimised
At Mutual Marketplace, we’ll take your procurement process from reactive to proactive and optimised. Starting with an analysis of your organisation’s procurement process, we’ll create for you a category plan and help you implement it with our category management services. Our approach combines smarter and stronger internal controls with comprehensive supplier management.
Reactive to Proactive
From a state of disparate units using various suppliers and acting upon approved requests, we’ll help your institution analyse your organisation’s procurement activities towards optimising your procurement process. We’ll help you categorise the items procured by your organisation, select preferred suppliers, draft contracts, identify opportunities for savings and manage risks.
Proactive to Proactive and Optimised
Beyond great purchase deals and realised savings, our category management solutions enhance procurement procedures, policies and strategy development one step at a time. Systems are put in place to enhance supplier performance and compliance, along with personnel compliance across the organisation. Procurement activities are properly tracked and recorded for the future use of data and further enhancement of procurement.
Key Enablers of Category Management
Category management has the potential to deliver great returns, provided that the following are present:
Organisation and Structure
The organisation and its structure clarify the role of every member in the procurement activity.
Optimised process with automated activities such as approvals, record keeping and settling accounts payables.
The right people in the right position participating in the enhancement of procurement – no matter what department they’re in.
Learning and Skills
People involved are willing to learn the concepts and skills involved in category management and how it affects their organisation’s procurement policies and procedures.
A process that integrates the involvement of key stakeholders in developing comprehensive sourcing strategies.
Technologies that can minimise errors, streamline procurement and gather data for a more accurate spend analysis.
The organisation has a thorough understanding of the market supply, enabling it to shape and improve its tendering process.
Why the Need for Category Management?
Category management opens opportunities to access cost control levers. Organisations that choose to integrate category management into their procurement process can:
Organisations obtain more competitive pricing and terms when they buy goods organisation-wide or engage in group buying. Looking into the supply market’s capabilities, we also identify vendors that can fulfil your requirements for less. We identify opportunities for savings, such as avoiding fully economy airfares of buying IT systems off the shelf. With a proactive and optimised procurement process, organisations also realise savings from the procurement efficiency.
Minimise Purchase Activities
Managing demands and consumption is part of category management. This strategy promotes a more mindful use of resources to reduce waste and optimise an organisation’s spend. Buying goods organisation-wide also reduces the need for procurement teams to manage disparate units’ procurement requests or activities. And with the selection of preferred suppliers, the volume of communications with suppliers is greatly reduced, along with their potential risks.
Enjoy Advantageous Supplier Relationships
Category management promotes forming stronger relationships with suppliers. Approaching suppliers with bigger contracts and clearer expectations of goods and services, organisations not only bring bigger business but also create opportunity for savings in terms of cost and time for suppliers. Through category management, we don’t only manage suppliers, we can also change their view of your organisation from a profitable business to a long-term partner. Establishing a mutually beneficial relationship with vendors, organisations find a way to reduce contract risks that they would be otherwise exposed to and use their relationship to leverage better deals, products or services.
Why Mutual Marketplace?
Mutual Marketplace is a procurement centre of excellence dedicated to helping Australia’s financial institutions. Our diverse team allows us to offer expertise across all areas of procurement and provide integrated buying solutions. Owned by Credit Union Australia and People’s Choice Credit, we provide organisations with the opportunity to leverage GST discounts that other procurement service organisations cannot offer.
Employ Procurement Best Practices
Our approach to category management helps deliver valuable market insights and industry-leading solutions. If you want to learn more about category management, we can discuss it with you in depth at your convenience.