critically-appraise-category-management

Introduction

Category management means the collaborative process between retailers and suppliers, which are aimed at managing categories instead of managing individual brands and products. It is also a method whereby the vendors, as well as retailers, make the team to manage their product categories on the store through store basis (Croom and Brandon-Jones, 2007). It is also considered as an element of efficient consumer responses, which even work as a strategy to make the manufacturer, as well as retailers, work together to offer quick responses to the needs of the customers. The term category management is about structuring the aspects of procurement resources by identifying the needs, negotiating contracts for attaining specific goods and services (Brege, Brehmer and Lindskog, 2010). It is vital in the business as it is useful for the end to end procurements of products and services for the effective performances of the management. It is further determined that category management is about delivering value, innovation without struggling during the transition phase for the strategic sourcing to category management. The main factor is to improve strategic sourcing by focusing upon the volume by reducing the costs along with the related obligations (CIPS, 2007). The application of the management in the business is effective as it benefits the aspects of purchasing by creating value though reducing the risks involved in the supply chain and the high costs that are associated with the process. The performances of the business and the control over the resources are being managed through the help of the category management process leading to effective cross-functional aspects (Brege, Brehmer and Lindskog, 2010). Procurement impacts the business and for the effectiveness of the business, the process must be effectively managed by ensuring optimization of capabilities. This will improve the control and ensure proper segmentation so that the value delivered is high and procurement services costs are low (CIPS, 2007). The study aims to critically determine the category management as a strategic approach to procurement and sourcing.

Four Pillars of Category Management

O’Brien has presented a framework that possesses sourcing strategically, managing the market, and also driving change as the foundation which consists of four pillars of category management, which rely on Breakthrough thinking, cross-functional teams, facts, and data approach, and also customer focus. The Four pillars of category management help in getting complete insight over the available opportunity and even ensure the robustness. However, one needs to take benefits of the footing given by base which is built on foundations.

Pillar 1: Breakthrough Thinking

There are very few organizations that effectively manage the sourcing that there is no place for higher gains. Category management is considered as changing sourcing in essential ways or even on ways that would give radical improvements. Although it is making the usage of competition to minimize prices, making usage of suppliers to change product’s values, and even change internal processes, category management is regarding the delivery of better values to the organization rather than traditional incremental improvement activities like Ad hoc negotiations. A breakthrough is an improvement in the performance level as compared to present performance (Carlsson, 2019). The continuous improvement generally represents the tactical negotiations with suppliers and keeping the price competitive. The step-change term being linked with breakthrough showcase a fundamental change brought in-game and a move from the present to the newer state.

Pillar 2: Customer Focus

It is the marketing and sales function that makes the interface with the end customers. The external customers give focus on category management and are likely to work internally with people who make an interface with customers mainly at the time of sales and marketing to acknowledge the needs and desires of the customers. Category management is not likely to meet the desire of each of the internal customers (Croom and Brandon-Jones, 2007). Different customers possess different needs, which often make conflicts, while some of the customers struggle to express their needs. It is the responsibility of an organization to acknowledge its internal customers and includes them in the sourcing process, agree on a compromise, and challenge be sure that the requirement is balanced, and that the solution is attained (Carlsson, 2019). Customer focus is extended beyond the responding and understanding of the external and internal needs of the customers. Each of the organizations needs to understand that customers are never wrong and there might be the possibility that they are either misguided, stubborn, rude, obstructive or ill-informed, but they can never be wrong.

Pillar 3: Cross-Functional Teams That Work

A greater part of the category management is focused on the teamwork in the business. When the category management is for the initiative of purchasing, then it will fail but when one person from purchase tries to drive a bigger change, then the organization will possess little appetite and couldn’t support harder change. Cross-functional teams are thus teams that possess relevant functions in the organization with team leaders who are also the purchasing category manager. It is even suggested that category management needs to avoid language which suggests that purchasing is leading as this might have negative effects (Dumont, 2014). Generally, cross-functional teams start with lesser interest and fight with one another and perform wrong work in a bad manner and even enhance the problems. However, when the team gets settles, then they work as a unit and understand the power of the project. The group of people requires training and development, and even appears to be difficult and complex to understand.

Facts and Data

Facts and data play a major role in mainly three areas within category management, which include the de-risking of the decision making, providing compelling business cases for the change, and also providing the reason to get engage with business and stakeholders. The facts and data collection run using the entire category management process.

The management of category is vital for the success of the business as it helps to increase the productivity of the managers by about 20% to 30%. The management has an effective impact on the optimization process as it increases effectiveness and efficiency. The optimization of the capabilities with the help of category management leads to lowering the costs of procurement, increases the sustainable value, accelerates the outcome and ensures scalable delivery (Dumont, 2014). Category management leads to the end category through improving the process and compliance for sustainability and outcomes. The end to end category management within the business can be well determined from the help of the picture below:

From the figure, the strength that is attained by the business can be well determined as it helps to improve the supply market, invoice validation, performance management and strategic sourcing. Contextually, it is vital to state that category management is critically about the strategic approach which is useful to segment the spending of the goods and services so that the functions can be met. The factor is to strategically source the resources so that the supply chain relationships can be well maintained to make effective purchase decisions. The needs of the stakeholders can be well determined, and the right products are being purchased to meet the requirements. Category management improves the strategic sourcing by driving and delivering value for effective growth and innovation so that the process of management is smooth (Elaine Porteou, 2018). Category management strengthens the business by focusing upon the strategic sourcing so that the volume of contract is delivered at a significant cost reduction along with the aspects of contractual obligations for the supplier led innovation. Strategic sourcing is related to the mature process of attaining great results by improving the contractual relationship with the management functions. From the broader perspective, category management is about delivering value, innovation and growth so that the struggles of the companies during the strategic sourcing to effective categorizing can be smoothened. Category management improves the process by focusing upon specific areas so that the business requirements can be managed so that the procurement decisions are effective (Grosvenor Performance Group, 2019). The category manager needs to dynamically improve the firm’s performance so that the visibility is improved for direct high performances and meets the demand.

Critique of Category Management Analysis

Advantage of introducing category management

Aggregation

Category management is the management of the strategy of several merchandise groups utilizing tie-ups as well as a partnership, which is aimed to increase turnover and profit by satisfying the needs and wants of the customers. Aggregation is very common in various businesses in a wider range of industries although there are various exceptions where collaborative projects might not be preferred (Henke and Zhang, 2010). Such situations possess an environment where success is linked heavily with the competitive advantage of during the time of sharing data between the organization which creates difficulties in anti-trust regulations and confidentiality. Category management also drastically assists the company in minimizing costs in the tougher category. It even improvises buying power, improves the attention of the market, and also intelligence from the intercompany benchmarking (Infosys, 2018). There is an even a chance of improvising services because of visibility and better attention given from suppliers.

Opportunities for Cost Savings

Category management is vital, and it is effective as it works by leveraging the expertise so that better insights can be gained for creating value. The cost savings can be done as the management is effective in computing the needs by segmenting the services and goods. The main idea is to reduce the costs and risks by controlling the factors (Henke and Zhang, 2010).

Vendor Risk management

The main aspect of the category management is to attain an in-depth understanding of the vendors so that the actions are well planned. Several risks are associated with suppliers; therefore, to manage the risks and the operations category management is vital. The risk assessment is effective thus helping in managing the services (O'Brien, 2015).

Benefits from Holistic Spending

For effective procurement and sourcing, the management must be effective; thus, the strategic sourcing is vitally ensured to scale the economies. Based on the category management, managers can offer benefits to suppliers so that the high volumes of goods are well managed. This is beneficial as the procurement and sourcing are done as per the plan and the repetition of the transaction can be avoided. The negotiation power increases for the management thus managing the prices.

Streamlining the Business Strategy

For the effectiveness of the business and to reduce the risks and cost, the streamlining of business is of importance. It is vital to state that while doing strategic planning for the business in terms of procurement, category management plays a strong role in meeting the goals. It is useful to manage the segments by identifying the needs. The management can add value to the business by reducing the risks of the supply chain so that the innovation is also initiated (Purchase Control, 2018).

The advantages are such that it can create and manage the demands so that the cash flow is well managed with greater compliance standards.

Disadvantages of introducing category management

Category management in purchasing is about effectively spending money so that the goods and services are managed in an organized manner. The main idea is too narrow the focus so that the long-term value is created that helps to reduce costs and increase productiveness. However, few issues are caused due to category management control.

Limiting the agility

One of the negative aspects of category management is that it limits the working with only one vendor. The limiting is such that the business is no longer able to shop the products from various vendors, thus curbing the diverse needs.

Negotiation

Regular negotiation with the vendors impacts the performances, thus impacting the supply chain along with services.

Critical Analysis of Category Management

Category management is one of the approaches which is holistic as it is about determining the profits in a category without drawing any margins. This management is useful and helps to make great business sense for retailers so that development and resources are managed in separate categories. The efficiencies are huge as the knowledge is being transferred from retailers, customers to ensure benefits. It can be cortically stated that category management needs to applaud for its innovation and ability to control the resources. Category management is effective for the success of the business as it helps to reduce the costs of the products by reducing the services by increasing the overall value to gain innovation (Purchase Control, 2018). Category management is one of the best practices that are being followed by the business for a better future. In this regard, it is vital to state that little organizations focus upon aggregating the spending to lower the prices so that the opportunities are well managed. This practice is of relevance as it segments the goods and services for cross-functionality. This form of management is useful to improve the business units by customizing factors so that customer satisfaction can be attained. It is a continuous process that is effective for operating considering the strategic procurement framework so that the dynamism of the business is effective. This management is different from the traditional form and is used to improve the process and manage the supply chain by spending less. The management helps to manage the behavior of buyers by avoiding the premium process as the solution offered is effective (Carlsson, 2019). The main factor is to manage the procurement process by reducing the wastes along with repetitive transactions. It is the best method to procure goods so that the high-value goods can be managed for successful strategic sourcing.

Conclusion

Thus, from the analysis of the paper, it can be comprehended that category management is about higher savings through category along with process so that the capabilities of the organization are augmented. The capabilities are about effective growth opportunities so that the fixed costs get reduced and the outcome is effective. It is comprehended that category management impacts the business in terms of efficiency and effectiveness so that the consistency is witnessed for sustainable buyers along with suppliers. This management is well effective as it allocates the resources for better outcomes by adding value within the timeframes. The risk is reduced and the visibility along with management spending is improved with the help of category management. The management is strategic in approach and improves the process of procurement and sourcing by generating information and operational efficiencies so that the supply position is effectively managed, and the supply chain is well improved. The segmentation is being considered upon and the change in the business is influenced by managing the resources by adding value and by reducing the costs associated. Category management is about aggregating knowledge within the category so that the services are well planned and effectively managed. This practice benefits the business by managing the entire process and meeting the demand and supply sides for creating value. Thus, category management is viewed as one of the integral functions that impact the business for the potential benefit of the business.

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References

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Henke, J. and Zhang, C., 2010. ‘Increasing supplier driven innovation’. MIT Sloan Review, Vol. No. 51, No. 2, pp.41–48.

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