Category Management 1.0 – Necessary, but Definitely Not Sufficient!

category management

Category management has had a good run – a good, long run. Back in 1983, McKinsey consultant Peter Kraljic laid out the importance of segmenting a supply base in order to apply the right levers and source those supply base segments, also known as “categories.” The late 1980s and 1990s institutionalized such category profiling as the first step in an n-step sourcing process like this one. Generic buyer/planners became strategic sourcers and began specializing in sourcing these categories. These category managers used this approach to rationalize suppliers, get better pricing and even monitor supplier performance.

But you can’t save your way to zero, and supply markets don’t fall neatly into nice hierarchical spend taxonomies. So procurement organizations are looking for new ways to engage stakeholders and suppliers alike outside of the “sourcing box,” and given the volatility of supply markets – especially with the digital disruption that’s happening these days – they need a way to segment supply and demand more granularly and intelligently to identify new ways of applying resources and extracting value. Customer relationship management(CRM) analytics are developing multi-dimensional customer/channel segmentation to align customers and co-create with them.  Meanwhile, procurement folks are flogging the same old 2x2s and using old approaches and rusty tools that don’t fit the realities of modern global supply chains.

So, “category management 1.0” isn’t going to cut it anymore. But, what’s next? What does “category management 2.0” look like? Is there an example?  

Actually, there are at least 9 of them. And they’re not the usual stuff you’ve heard about. You may know a few, but you definitely won’t know them all.

If you’re interested, PRO subscribers can read about them here, here and here. But if you can’t scrape up the coin, then you can still download the full report here (registration required).

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