Category Management for Procurement Professionals

Your organisation probably does Category Management in some form, but the truth is that most businesses are only scratching the surface and leave much of the available value on the table. Using our experience from more than 80 category management consulting assignments around the globe and findings from Future Purchasing's most in-depth category management research, we can help you unlock this value.

Category Management has great potential to deliver value beyond traditional sourcing approaches by building greater alignment with stakeholder requirements and creating long-term strategies for managing spend.

It operates most successfully when it is directly integrated with two fundamental procurement processes:

  1. Category Group Planning: Understanding stakeholder priorities and joint annual planning of category management and supplier management projects.
  2. Supplier Management: Managing of supplier performance, ongoing value improvement and supplier relationship quality.

What is Category Management?

Category management is the strategic end-to-end process for buying goods and services that aligns business goals and requirements with supply market capability. It transforms the long-term value achieved from an organisation’s total supplier spend and drives reduced cost, reduced risk, improved service and improved revenue.

Learn more:  Category Management Definition

How is category management different from traditional strategic sourcing?

The checklist below summarises ten features of category management that differentiate it from traditional sourcing:

  1. Internal Relationship Quality: Procurement team has a very close and collaborative working relationship with business stakeholders and is perceived as a trusted commercial adviser.
  2. End-to-End Process: Category Management, Category Group Planning and Supplier Management activities are integrated in a simple and balanced model.
  3. Cross-Functional Teams: Team working with business stakeholders is used at the category team level to understand requirements, identify all improvement opportunities and implement joint strategies.
  4. Governance: Customised structures are established at the programme, category and supplier levels to provide teams with direction, guidance, challenge and problem resolution.
  5. Business Sponsorship: Executive sponsors from the business set objectives and direction, secure cross-functional team resources, drive internal change and generate business commitment.
  6. Early Involvement: Category managers are fully aware of planned business activities and involved in the first stages so that they can influence key cost drivers up-front before they are locked-in.
  7. Supply Market Engagement: Suppliers are involved during the strategy creation process to share knowledge, experience and test innovation and improvement ideas.
  8. Value Levers: All value levers are systematically reviewed to generate the maximum number of potential improvement opportunities e.g. reducing cost/risk and enhancing revenues.
  9. Documented Strategy: Facts and data, analyses, improvement ideas are summarised in 1-3-5 year category strategies that are formally approved by procurement and stakeholders.
  10. Supplier Relationships: Performance-to-contract commitments are achieved as standard and additional value delivered through stronger relationships developed with key suppliers. 

Category Management requires a much more collaborative approach to managing your spend with a greater focus on understanding your real business needs, working in cross-functional way with technical stakeholders, securing business sponsorship and using value levers creatively to systematically identify opportunities to increase value from your spend.

Category management has five building blocks for successful implementation

From our experience of implementing category management with more than 80 clients, we have identified five building blocks and 100 best practices that can help category management to be successfully embedded as a lever to driving better procurement performance.

1. BUILD: is the physical design, creation and continuous improvement of a practical category management methodology, process, toolkit and templates to facilitate the creation of compelling category and strategic sourcing strategies.

How can Future Purchasing help:   Future Purchasing is a centre of excellence in the design and implementation of category management processes that actually work and motivate teams to use them. Our toolkit contains high impact and compelling summaries of each of the critical steps and tools in the process. Appealing to both category management professionals and relevant stakeholders, they can be readily customised to supplement client materials as required.

(i) Process Steps: Clearly defined activities that provide a roadmap for all category management projects with flexibility on which guides and templates should be used. (ii) Guides: Easy-to-understand 'how-to' guides that provide cross-functional category teams with information on every step, activity, tool and template in the process.
(iii) Templates: Clear, attractive, easy to complete templates that relate directly to defined process steps and are designed to prompt thinking and opportunity identification. (iv) Governance: Regular reporting of category progress, both within the process and in key areas such as stakeholder engagement and insight development is built into the process.

2. LEARN: is building technical and behavioural skills for procurement teams and category management awareness training for stakeholders.

How can Future Purchasing help:   We deliver procurement learning programmes that build mastery. Programmes are typically a blend of on-line learning, formal classroom learning events, small group coaching sessions and individual coaching sessions.

We combine technical skills building with training and coaching in key behavioural and soft skills areas that enable category and supplier management practices to be more effectively deployed across geographic and functional boundaries.

3. LEAD:  is the governance and operating model that embeds category management in an organisation and ensures its long-term sustainability.

How can Future Purchasing help: The 2016-17 FP Category Management Report confirms that moving from a Follower to a Leader in category management results in a 2.7x performance improvement – boosting average savings delivery from 2.6% to 7.7% and beyond. We have identified the Top 19 critical practices that drive this step-change and separate Leaders from Followers. We facilitate sessions with procurement leadership teams to agree current strengths and weaknesses for each practice, along with a prioritised list of improvements to implement over 12-18 months.

4. APPLY: is the practical running of a category management programme covering all category or sourcing projects under way across an organisation.

How can Future Purchasing help: Structure and rigour are crucial to delivering the promise of category management and we regularly provide hands-on support to category management teams. This includes communications and change planning, category prioritisation, category governance, progress tracking, holding formal gate reviews and proactive coaching interventions at the category project level to ensure successful completion of the category projects. We draw on our proven tools and team’s deep experience to ensure that category management programmes operate smoothly and deliver their targeted results.

5. DELIVER: is the end results produced by the category management activities and assessed through a range of metrics.

How can Future Purchasing help: We ensure clients achieve compelling and well communicated deliverables that demonstrate the value of category management and gain support from the stakeholder community. We ensure that category strategies identify all available value lever opportunities – including risk and revenue, as well as cost reduction. We support and challenge clients to deliver value in the short, medium and long term. We provide tools to ensure that the opportunities identified in category strategies are realised, measured and tracked as they are implemented.

Example tracking and reporting tools

Why we selected Future Purchasing?

“We looked at several major consultancies and chose Future Purchasing because of the excellent quality and customer service levels of the people in the team. The Transformation team built a vision for us that inspired our Executive Management Group and we embarked on a three year programme of change. Future Purchasing were ambitious for us, and strove to accommodate cultural and Business Unit differences to secure ongoing and sustainable results. The team blended the delivery of Programme Management frameworks and processes with coaching and mentoring of internal team members with skill, operating at all levels within the organisation. Most importantly I felt Future Purchasing cared deeply about the outcome, as if they were a member of our internal team. This is what sets them apart.”

Chief Financial Officer, European Media Company
“What was great about what Future Purchasing did, was the set-up of the procurement transformation programme. Engaging the sponsors, and the business and establishing the benefits tracker (recognising all the different types of benefits). We are still using the same forums and trackers and building on them now.”

Procurement Director, Media company, Netherlands
“Future Purchasing have been our preferred partners supporting our operating model and learning & development needs since 2011.  We implemented Track8 Pro to support our Category Management ambitions.  The system is user friendly and provides an invaluable tool for visibility of project status.  But more importantly for us, it has helped the team improve their understanding of category and supplier management.  We now have a procurement team who are confident and competent users of category management as an approach and a tool.  We have used, and still use Track8 as an online learning tool for our new starters and as a refresher.”

Procurement Director, FMCG, UK

Have questions?

Request a free of charge consultation.
After you show us how category management operates in your business, we can walk you through the steps you need to take to transform your category management performance and rapidly increase your return on investment in Category Management.

Contact Us To Find Out More

Read More

Category Management for Procurement Professionals
The Business Case for Category Management
Implementing Category Management
Category Group Planning
Track8 Procurement Software
Global Category Management Leadership Report 2017
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