Category management

What is category management?

Many organisations ask ‘what is category management?’.

The answer is that category management is a powerful way of reimagining the way procurement works. It can be applied to almost every business and can make it more efficient and responsive

Category management means grouping related products into categories. Each category is managed as its own business unit. Each category is then treated as an independent business unit with its own strategy and goals. This makes it possible to manage products in a more structured way where they can be aligned with the wider needs of the business.

When it is done properly, category management can become a data-driven way of meeting customer demands and optimising the supply chain. In the long run, it can maximise consumer and organisational value.

Category Management Definition

The most widely used category management definition is that it is the process of dividing products into categories where they can be managed together

What value does it bring to organisations?

Starting the category management process

Every product and service, every category, has its own characteristics. It is important to note that no two businesses or organisations will operate in the same way.

That means the process of developing effective category management is going to be different for each use case. Despite this, there are some basic steps that most organisations can follow:

• Define the category by clearly outlining the goods or services
• Analyse spend patterns and market dynamics using internal data and external intelligence
• Engage stakeholders to ensure alignment with wider business objectives
• Develop and implement a sourcing strategy with measurable goals and clear value drivers
• Review and improve performance through Key Performance Indicators (KPIs) and continuous supplier evaluation

Shifting from a reactive purchasing approach to strategic category management means procurement becomes a proactive business partner and commercial enabler.

What are the principles of category management?

The category management definition makes it clear how the business benefits can be felt across the entire organisation. It will now help to understand the three main principles that inform category management:

1. Customer-centric focus

This is the key principle. Category management strategy needs to be closely coordinated with customer needs. Organisations that keep the customer at the centre of what they do will create better products and enjoy greater customer satisfaction.

You should also use data as the basis for decision-making, for strategy adjustments and to predict market trends.

2. Cross-functional collaboration (engage and implement)

Successful category management relies on collaboration across business units. This focus works best with regular, joint meetings, brainstorming sessions and joint goals to unify efforts.

3. Insight-led strategy (analyse and review)

Using analytics, businesses can anticipate market shifts and refine strategies. Using advanced analytics tools will generate data that can be used to adjust strategies and refine the company’s risk profile.

Tools to make category management work

Successful category management relies on using tools that support strategic thinking, supplier evaluation, and data-driven decisions.

The main tool is the CIPS Category Management Cycle. It spans all stages from scoping to performance review and is designed to support strategic thinking while remaining practical and repeatable.

There are also supporting tools. These include:

• Kraljic Matrix: Helps prioritise categories by supply risk and business impact
• ABC Analysis: Segments categories or suppliers by value and importance
• STEEPLED Analysis: Assesses macro-environmental factors that may affect sourcing
• eSourcing Tools: Digital platforms that streamline sourcing and evaluation
• ERP and Procurement Systems: Enable centralised data, contract visibility, and automation of workflows

Together, these tools support procurement professionals in building robust, evidence led category strategies.

Real world examples: retail indirect services category management

One example of category management in practice can be found in retail. In this sector, indirect services like cleaning, security, and waste management are often split across many suppliers and often serve different locations.

By using category management principles, retailers can put these services into clearly defined categories. It can improve performance and reduce costs.

Applying the category management principles supports consistency across store locations and strengthens supplier accountability. It also enables all progress towards sustainability and compliance goals to be carefully monitored.

Case study

A UK-based retailer applied this structure across its UK operations.

Its supplier base was reduced by 35%, and it increased service level compliance by 22%. Indirect spend was cut by 12% in just 18 months.

Success relied on consolidating categories and on working closely with store managers, legal, and ESG teams to embed both commercial and brand values into the sourcing strategies.

How it applies to retail

Future trends in category management

As procurement becomes more strategic, category management is evolving to embrace data, digital tools, and ESG priorities.

Trends to watch:

• AI-driven spend analysis and market forecasting
• Integration of social value metrics into category plans
• Agile category planning to reflect rapidly changing business environments

For procurement functions aiming to drive impact, adopting the CIPS Category Management Cycle and the principles behind it remains essential.

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