It’s a great and worthwhile pursuit for Chief Procurement Officers to invest in their people, so, in that vein, over the next few weeks we will be analyzing the key skills and capabilities (or higher-level competencies) that a procurement professional (and department) should have in place in order to execute successfully. We will be using Ardent Partners’ Procurement Staff Competency Matrix that we developed with our CPO audience. This competency matrix established industry-wide capability measures for the average procurement organization.
We hope this series will help professionals and their managers to better understand and communicate what the required capabilities are for specific job roles within the procurement department and thereby help identify, develop, and deploy the people with the right skills into the most suitable positions. Professionals can also use this series to better identify where current gaps exist in their organization or within their own skill sets so that they can take action to improve or move into roles with greater responsibility (and pay).
Today’s Competency: Category Management
What is Category Management?
Category management is a business process whereby someone or some team in procurement owns the management of an entire category of spend. Usually these are larger or more strategic categories that require dedicated time and a level of expertise or specialization. For example, at any major automobile manufacturer, you will have teams of buyers focused on one area, like “radios” or “glass” – they manage the current supplier relationship and ensure they continue working with the highest value suppliers. They also track the market to understand trends, changes, and innovation.
Category management blends traditional sourcing approaches with more robust category strategies, more penetrating views of supply markets, and deeper collaborative ties with suppliers. It’s how the next generation of sourcing professionals will keep the business charging forward today while preparing to meet tomorrow’s top challenges.
Importance to the Procurement Department
Category management is a key element to what moves a department’s sourcing from the more tactical to the strategic. Being able to understand the different categories that comprise total enterprise spend and the requirements that the business has in managing them can ensure that the proper sourcing strategies are used to identify the suppliers that offer the highest value in each case. For example, one global pharmaceutical company Chief Procurement Officer that I interviewed was in the process of developing a group of “Commodity Councils” that will standardize category requirements and establish category and sourcing strategies/processes at a global level, where possible. The standardization of requirements and processes should increase the opportunities to reduce the number of current suppliers and gain volume discounts while also ensuring that best practice category knowledge is shared and accessed by all key stakeholders.
Importance to Career Advancement
Like other facets of procurement, owning and successfully managing spend categories adds value to your company as well as your career. Taking on increasingly larger and more complex spend categories, managing effective supplier relationships, and ensuring high supplier quality and value deepens your value to your team and broadens your expertise across the procurement spectrum, which you should leverage into greater opportunity.
There are two aspects of category management worth discussing and discerning. (1) Category managers often develop their expertise as it relates to a specific category or series of categories and are marketable based upon their knowledge and experience in a specific area (2) Much in teh same way that a sourcing process can be applied to direct, indirect, or services categories, the same holds true for category management – the process of managing a category can be applied to a broad range of categories. As you continue to advance,you may have to decide if you are going to specialize in a category or commodity area (IT hardware, services, MRO, etc>) or are you going to be more of a generalist. – it is a very common decision point in many fields – how deep or how broad do I go? There is no right or wrong answer here, but what you decide will shape the types of future opportunities you see and your market value.
Although we don’t advocate job hopping as soon as you acquire a new marketable skill, we do advocate being pragmatic in the New Economy. Your father’s (or grandfather’s) GE is gone. Few people work for the same employer throughout their career and retire with a company pension. Sooner or later, whether you initiate it or not, you’re bound to leave your current employer. That is why in the interim, your relationship is symbiotic – you both give and get, enriching and sustaining each other. When it is time to leave, consider the value you brought to your team and company and leverage that into your next success story.
The CPO’s Grade
The “Category Management” competency received an average grade, a C, from Chief Procurement Officers, meaning that respondents to our survey believe that their staff is competent, but not outstanding. Category management tends to be a focus for more mature procurement departments who have gone through an initial wave or two to understand what they are managing and have developed a series of standardized (and possibly automated) processes to use and engage the business. CPOs who have shifted their focus from “putting more spend under management” to “managing spend well” usually need category managers.
How to Advance Your Skills
Sourcing/procurement/supplier relationship management teams in collaboration with the business stakeholders should develop strategies that define how the different spend categories should be managed to the benefit of the enterprise. The strategies should be based on a series of factors that include:
• How the category is used
• Where and by whom the category is used
• The amount of category spend
• How the category is procured, used, and/or managed
• The category’s level of strategic or operational importance
• Supply market characteristics (type and location of suppliers, etc.)
• Category characteristics (size, on-hand inventory requirements, etc.)
• The type of contract and supplier relationship desired
As the percentage of spend under management and thereby the number of managed categories increases, sourcing teams should increasingly seek out their business counterparts to help them understand the key aspects of certain categories and develop category strategies. Since no sourcing team can have expertise in every category of enterprise spend, collaboration with the business is needed to drive greater value.