Future Purchasing Advent Calendar Window Fourteen

Posted 14/12/2016

“In 11th place, in order of importance, ‘category managers having formal category management objectives’. 58% do…”

Overall only 58% of organisations are currently giving formal category management objectives. 74% Leaders agreed or strongly agreed that their category managers have formal objectives for category management – compared with 52% of Followers. 25% of Followers disagreed or strongly disagreed with the statement. In the previous survey 97% of leaders agreed their category managers had formal objectives, compared with 59% of followers so the recent results show a drop in formal objectives.

This may be in part due to popular belief that somehow category management had become a bit passé and movement was starting towards alternative, and also important, areas like Supplier Relationship Management to the detriment of category management.  It might also be partly explained that organisations now thought they had arrived at their category management ‘pinnacle’ and so it was a hygiene activity, and is just done – so there’s no need for formal objectives anymore.  Or, it could be simply that take up and resistance had been hard, and a previous implementation of category management hadn’t been that successful so objectives were being dropped in favour of some old favourites.

We can surmise on the above based on experience, but the analysis does tell us that this is an extremely important contributor to category management success. Our survey also clearly states that category management is far from passé and there is a great deal more value available to the majority of organisations who are still in the Follower camp. Even more importantly, is agreeing and formalising these objectives with stakeholders, as that was recognised as the 4 th highest driver of category management success. See window 7.

New Year’s Resolution no. 14:  

1) Instigate/Review your Annual Category Group Planning: All organisations have annual planning or budgeting cycles that set the corporate level financial targets. For procurement teams this often means a specific budget target to meet and a set of specific cost reduction targets. If these savings targets are stretching in any way, procurement cannot deliver them in isolation and rely heavily on input and co-operation from their stakeholders – to access all commercial and technical opportunities – via category management. Therefore it is essential that the accountability for target setting and delivery is agreed and owned jointly by Procurement and business stakeholders. This will leverage and integrate their activities in a much more impactful way and move focus beyond Price & Cost, to Revenue Generation and Risk Avoidance. Direction from a Procurement capable CFO helps here.

2) Formalise this in individual KPIs: Formalise joint accountability for delivery of category management projects by formally embedding in both parties’ annual personal KPIs. This reinforces the need to work together for mutual benefit.  Be careful that this is not just a number, the KPI should also reference the expected process, the ‘how’ as well as ‘whats’ such as the delivery of the actual category strategy against a range of value levers, the macro implementation plan that moves beyond just RFx, the active engagement of the business and so on.

Let us know how you get on.

You can click below to download our 2016-17 Global Category Management Leadership Report Executive Summary.

Tagged by topic: Category Group Planning , Category Management , Category Management Survey

  by Allison Ford-Langstaff

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