Category management has become very popular in most supply chains in the recent past. As one would ask, what are the objectives of this so much hyped concept? Well, in a few minutes you will be able to know exactly why the concept has tremendously gained popularity in supply chains, after reading through the objectives of category management below.
- Efficiency Improvement
Efficiency in the supply chain is one of the major objectives of category management. The concept endeavors to enable the category managers to gain better visibility into the category spend and identify any potential savings opportunities. The managers are empowered to focus their time and efforts to concerted market analysis and appropriately leverage their procurement decisions, which significantly reflect on the organization’s bottom line.
- Demand Management
Demand management is the process of identifying projects, activities, and programs to be undertaken in an organization for a definite period of time while putting into consideration the external market situation and the organization’s overall strategy. It also involves the assessment of the ongoing projects, programs, and activities.
Category management significantly simplifies demand management, which is often perceived as a complex task. This is because each category manager will be dealing with his portfolio separately rather than treating the entire organization’s demand as a block item. Demand management is another objective of category management that has seen it gain popularity immensely over the years.
- Consolidation of Organization’s Spend:
Managing by category aims at enabling category managers to easily identify consolidation opportunities. This significantly reduces operational costs. Where necessary, other procurement strategies like outsourcing can easily be found applicable if the spend analysis points to such strategies. Centralizing spend data also improves the tracking and reporting of procurement activities.
- Improved Vendor Relationships
Supplier relationship is one of the assets that your supply chain cannot afford to look down upon. Category management aims at improving supplier relationships through a number of ways; for instance, it aims at improving information sharing. Additionally, category management enhances vendor risk management by enabling the category manager to undertake a comparative analysis of suppliers’ performance. This results in increased security of supply and reduces production interruptions and downtime.
- Customer Satisfaction
You probably have heard the old adage for a million times, “The customer is the king”. Category management is very much alive to this adage and has the customer at heart. As one of its objectives, category management endeavors to achieve maximum levels of customer satisfaction which ultimately leads to unmatched customer loyalty. Customer satisfaction and loyalty are a result of shorter cycle time for fulfilling customer orders
- Improved Competitiveness
A supply chain practicing category management cannot compare to one which has not embraced the concept. Once you undertake category management, you are guaranteed of a larger market share, which is as a result of customer satisfaction, better pricing strategies, and reduced operational costs.
As Peter Drucker once opined, “Management by objective works – if you know the objectives. Ninety percent of the time you don’t.” It is important that before you undertake any strategy or concept, you know its objectives and see if they align with your business objectives.
The objectives of category management outlined above will, most likely, perfectly agree with your business objectives. You, therefore, have got no reason to worry as you go ahead and implement category management in your supply chain.