How can you apply category management to reduce spend for your business?

1 Identify your spend categories

The first step in category management is to identify and classify your spend into different categories, based on the nature, function, and importance of the products or services you buy. For example, you might have categories such as office supplies, IT equipment, marketing, travel, or utilities. You can use various tools and methods to collect and analyze your spend data, such as spend analysis software, invoices, contracts, or purchase orders. The goal is to have a clear and comprehensive picture of your current spend across all categories, and how it aligns with your business objectives and priorities.

2 Assess your category performance

The next step is to assess how well each category is performing, in terms of cost, quality, risk, and value. You can use various metrics and indicators to measure and compare your category performance, such as total cost of ownership, return on investment, customer satisfaction, supplier performance, or market share. You can also benchmark your performance against industry standards or best practices, or conduct a SWOT analysis to identify your strengths, weaknesses, opportunities, and threats. The goal is to understand the gaps and issues in your current category performance, and the potential for improvement.

4 Implement your category strategy

The fourth step is to implement your category strategy, according to your action plan and timeline. You should follow the best practices and processes for procurement, such as market research, supplier selection, contract negotiation, contract management, supplier relationship management, or performance management. You should also ensure that you have the necessary resources, capabilities, and tools to execute your strategy effectively and efficiently. You should also communicate your strategy and its benefits to your internal and external stakeholders, and secure their buy-in and support.

5 Review your category results

The final step is to review your category results, and evaluate how well you have achieved your objectives and targets. You should use the same metrics and indicators that you used to assess your category performance, and compare them with your baseline and expected outcomes. You should also collect feedback from your stakeholders, and identify the lessons learned and best practices from your category management experience. The goal is to measure and demonstrate the value and impact of your category management, and to identify the areas for further improvement or optimization.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?