What happens before Category Management?
The answer to this can fundamentally affect how category management delivers in practice.
Before Category Management is a phase of activity that determines which categories need focus and resources pouring into them in the next period, an element of strategic procurement it is crucial because one of two things tends to happen without this. Categories are selected with no logic behind the selection, resulting in resources burned to no effect. Or, ( and don’t laugh, this happens regularly ) all categories are chosen, and procurement faces the impossible task of developing high-quality strategies and then implementing them in every area of spending all at the same time.
This pre-category management activity comes under several names, but all are doing the same thing. We favour ‘strategic alignment,’ although ‘category group planning’ has been used as well. The concept of strategic alignment is to do a rapid review of the internal and external environment to identify likely organisational priorities and map that against categories and known supply chain challenges to identify the most important categories to tackle, given the available resources.
The importance of the internal environment cannot be understated. When we understand the priorities of our stakeholders for the next year, we are far more likely to focus on the category areas that will most impact those priorities. Of course, some priorities span all category areas, such as the emergence of net-zero carbon targets and approaches. Others will be more specific to particular categories.
To get to this understanding, spending time with stakeholders and getting their input on what is essential is critical and forms the foundation of the later category activity. As ever, there will be a whole range of competing priorities in the organisation, and we need a mechanism to help us find a balance between the various expressions of need. Fortunately, such approaches are well developed in category management and can be readily adopted for strategic alignment.
We often find, at this stage, that work is needed on the taxonomy of categories to get them to work appropriately and to iron out some of the assumptions and structures that can cause problems later. One of the background challenges within this ( and one we often see) is how well categories are defined in the organisation. A regular challenge is finding a taxonomy built around organisational or budget structures rather than actual categories. This regularly leads to situations in which the same category is addressed by multiple teams trying to work with budgetary or organisational definitions, often with no reference to each other.
The endpoint of this strategic procurement approach is to develop a plan stating which category areas will be worked on for the next 12 months and showing the linkage to stakeholder priorities and organisational objectives.
Planning sets categories up for success right from the start. Early stakeholder buy-in is in place, and there is clarity for the category leader about what is being tackled and how it links to stakeholder needs.
Look at your category planning phase and see how you can improve it. Suppose your category leads had a clear brief understanding of stakeholder needs and wants and a sense of how the activity linked to organisational objectives. Would they be motivated to produce better, more robust category strategies? We think they would and that you should embrace this activity as soon as possible.