Category management vs strategic sourcing
Discover the differences between two of the most common procurement approaches
The big differences between category management and strategic sourcing
Category management and strategic sourcing are two of the most common procurement approaches. Both approaches aim to drive efficiencies throughout the supply chain, whilst looking at opportunities within the market.
Category management
Category management involves segmenting the main areas of spend into groups of products and services according to their function. It requires organisations to work collaboratively on individual categories, examining the entire category spend, the marketplace and individual suppliers.
Strategic sourcing
Strategic sourcing involves the process of finding, evaluating, and choosing suppliers which meet the agreed organisation’s need. This strategy isn’t just about reducing the cost of products or services, it’s about driving efficiency within the supply chain in the long term.
Advantages of category management
Category management is increasingly being used in procurement and is no longer a process that is just used for retail. Here are some benefits of implementing category management within your organisation.
- Allows procurement professionals to focus on their time to conduct market analysis to fully leverage their negotiations
- Helps to correctly manage suppliers to align with corporate objectives
- Enhanced supplier relationships
- Gain an in depth understanding of how each category contributes to risk management through market analysis
- Enhances the customer experience as organisation’s will be able to focus on one category and look at promotions and product availability.
Disadvantages of category management
For category management to be successful, it relies on the good communication and collaboration with suppliers, which can sometimes be difficult. Here are some challenges you may face when implementing category management.
Category management
Category management requires investment in time and commitment, along with the right training and skills of the workforce.
Active participation
It relies on active participation of many functions and individuals across the organisation.
Good category manager
Finding a ‘good’ category manager can be tricky. It’s a very specialist procurement role which requires the individual to have a background in the category being handled.
Advantages of strategic sourcing
Strategic sourcing enables you to source from the most capable suppliers, giving you an extra edge over your competitors. There are some additional benefits you’ll see by implementing strategic sourcing into your organisation.
- Strategic sourcing helps to develop a deeper understanding of a company’s requirements
- It will help you achieve and maintain a competitive advantage
- To achieve sustainable procurement, strategic sourcing can help
- Helps to sustain long term relationships with stakeholders and suppliers
- Considered to be an effective way to deliver sustainable cost savings
- Promotes healthy competition between suppliers
Disadvantages of strategic sourcing
Strategic sourcing is a continuous process, that requires a lot of decisions to be made on long-term value, not just the cost of the product. Here are some challenges that strategic sourcing could cause your organisation.
Resources
Strategic sourcing requires lots of resources and management
Time
Strategic sourcing takes a long time to implement which can cause impracticalities for the organisation. It requires early involvement to align strategic sourcing with business objectives.
Challenge
A challenge is working out whether to source globally or locally which can sometimes be tricky as well as switching to new suppliers.
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