Category Management is Not Strategic Sourcing


Roughly a decade ago, a handful of technology vendors did a great disservice to the vocabulary of procurement by offering targeted extensions to early sourcing suites that enabled a view of category/commodity activity that extended beyond one-off sourcing events and labeling these modules and capabilities as “category management.” For example, adding in generic Bureau of Labor statistics pricing index information alongside sourcing tools and high-level spend analysis without the ability to truly manage the lifecycle of a category is not true category management.

Yet as my colleague Pierre Mitchell suggested in a recent brief on the topic, “defining and managing spend categories is clearly foundational to strategic sourcing.” The challenge, however, is that some procurement organizations fell for the original tech vision, Pierre said, and in turn labeled their own, “category-based sourcing efforts ‘category management’ rather than extending the idea of categories beyond sourcing. 
Worse still, others have just renamed their strategic sourcing process ‘category management’ because the strategic sourcing process failed to properly engage stakeholders.”

Fundamentally, as Pierre observed, “Casting category management as category sourcing is limiting.” And simply slapping on a new name to an old approach to strategic procurement is even worse. Underlying the challenge is that strategic sourcing is inherently siloed – sourcing is just one lifecycle processes – and episodic. On an activity basis, it can also be largely tactical, especially if the monetary limits for procurement involvement are set too low. Unfortunately, this tactical sourcing of tail spend can be the tail that wags the dog, taking up precious category management staff resources rather than focusing on the strategic aspects of category management.

But what is category management and how you can truly take advantage of it by first understanding it and then extending it to transform procurement? Download the Spend Matters e-book Supercharging Category Management: Free Yourself from Siloed Sourcing to Unlock Breakthrough Value now and see for yourself.

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