Fueling Profitability with Creative Category Management
By Mackenzie Oakley | February 15, 2022
Profitability is a main focus for businesses of all shapes and sizes. Business leaders and professionals are constantly thinking of ways to create and structure functions within the organization that are profitable. This is especially true of procurement.
Sourcing and procurement are more important than ever and the profession has proven to be the backbone of many organizations. Procurement notably reaches across the aisle to partner with other functions within the business more often than others, which helps the entire business be successful.
How to fuel business growth
The traditional approach to procurement
Traditionally, procurement may try to establish a category management process to look after different segments of spend, each matched with a category manager that has deep knowledge or expertise regarding the topic at hand.
The traditional way of thought also includes staffing each category with individuals based on the amount of spend under management. The higher the spend, the more people that are needed to effectively manage that spend. The complexity of the category determines the level at which you’re hiring as well.
Of course, this approach isn’t always realistic – or necessary – depending on the number of transactions taking place, the type of commodity being sourced or products being purchased.
Additionally, when a category manager interacts with the business with an expertise mentality, it can create an uncomfortable dynamic depending on the culture of the organization. The goal is to increase the amount of communication that takes place between functions, not limit it.
A unique approach to procurement
A more unique approach to procurement is taking a step back and looking at the data available to you for each category or each function. Use data to determine how much actual human work – and what type of work – is available in each category. The data will also help you decide which kind of hires make sense, and what types of positions will make the biggest impact.
Another perspective, offered by Gary Levitan of WeWork, is that procurement is very much involved in stakeholder management, and oftentimes the stakeholders are – or should be – the experts. Even if they’re not, they’re the ones who are ultimately making the final decisions and writing the checks.
If the roles are reversed, it can be difficult to collaborate and apply best sourcing practices each situation. It becomes harder to communicate the optimal outcome you’d like to see. When you move away from this viewpoint, you uncover more value within the processes for the business.
Creative category management to fuel business growth
The challenge is being able to strike a balance between the two scenarios and take a creative approach to category management.
When developing a strategy, it’s also important to note that if something becomes too tactical, whether it be strategic sourcing or category management, the perceived value of what procurement brings to the table can easily be diminished.
Figuring out the lay of the land, the different personalities involved, and the nuances of supplier partnerships is the literal art and science of procurement. There is, of course, no set formula which makes developing a creative approach to procurement and category management challenging.
The biggest piece of advice would be to keep in mind that every organization is different – from the people involved to how you deliver to your customers – all of the moving parts have to be taken into account.
Assess the business, assess the stakeholders involved, remain flexible and agile, and approach each scenario to fit the needs of your internal customers.
There is a continuum involved that will vary from category to category but if you can find the right creative balance, you’ll undoubtedly find success.
For more insight into using creative category management to fuel business growth, listen as Gary Levitan, the Global Head of Procurement, Sourcing, & Supply Chain at WeWork, shares his thoughts on the best way to build out a procurement function through people and process.
With over 15 years experience in procurement, Gary’s ability to bring stakeholder groups within the business together to meet or exceed their objectives is impressive.
For more category management resources, visit Unaversity, Una’s online resource center dedicated to empowering procurement.