It is time to revitalize Category Management with data analytics

To many companies, especially those with the global footprint last two years was a hard time. Businesses had to deal with problems of jagged supply chains, high pricing levels in supplier markets that had not been recorded before or forced changes in consumers behavior. To prevent the negative effects of all the disturbances many optimization projects have been launched. Most often they have an interdisciplinary and transversal character and must consider the unparalleled dynamics of the changes in the business environment. All these efforts overlap with strategic tasks related to the inclusion of ESG programs or restricted party screening (RPS). Category management is, of course, strongly influenced by all those transformations and must adapt itself to the new conditions.

New expectations towards category management.

Recently, it has become clear?that running sourcing in the same way as it has been done for last two decades will not deliver exceptional results business organizations expect from their procurement departments. So, what has to change?

• More agility – currently entire business organizations are evolving towards greater agility and in Procurement such changes are part of the larger-scale process. Located between the business and the suppliers however, Procurement becomes a special subject of this transformation as it is expected to work faster, in multidirectional way, and more cooperatively.
• Closer to the business – business needs are highly variable, these days. This increases the sourcing irregularity. Often, at the same time there are many initiatives going across the entire business organizations in which category managers must participate. So, category managers must adjust their procurement activities accordingly and have an extremely flexible approach to setting strategic goals. All this is not possible without tight cooperation with the business on a daily basis.
• Shorter strategy implementation cycles – implementation of procurement strategies in annual cycles does not correspond to the dynamics of changes of sourcing conditions and business needs taking place today. These new circumstances require to revise strategies in shorter cycles and speed up procurement activities, to maximize the value brought to the entire business.
• More emphasis on efficient management of the procurement process, less time spent on category recognition – spending too much on time building technical knowledge as well as analysing supplier markets by category managers is being questioned, now. Today, category managers can and should obtain this information easily from technical experts and business information providers.

The consequence seems to be getting away from the traditional model of procurement organizations being built around categories at least to a certain extent. Category managers should not necessarily be associated with specific procurement categories, but just be fast and agile specialists in sourcing processes and supplier management. However, bearing in mind that we are dealing with the legacy of the restrictive division of the responsibility for procurement categories, this change will take some time and probably will only apply to certain groups of procurement categories.

How data analytics technology helps Procurement to meet the new expectations in terms of Category Management?

Access to actual procurement and market data translated into insights is crucial for the realization of the above-mentioned postulates. Here is how valuable data analytics is in that context:

• Analytical dashboards placed centrally between Procurement and other functions free up time previously spent in Excel, which now can be spent on collaborative cooperation to solve wider spectrum of issues.
• Easy access to insights based in real-time data in tandem with remote work favours creation of cross-functional geographically unlimited teams which will make more beneficial business decisions.
• Enhanced cooperation between category mangers and the business promotes better management of stakeholders including technical experts from whom category managers need to acquire technical expertise.
• Procurement analytics with integrated external data on commodities and suppliers significantly shorten time needed to adjust sourcing strategy and tactics.
• Key elements of category management apart from cost management i.e. risk management and supplier relationship management can to be managed much more carefully and proactively.

From the point of view of the development of data analytics technology, the next step, which is quite near, will be the deployment of predictive and prescriptive tools based on machine learning and artificial intelligence into the procurement environment. This will further enhance the agility in category management and specialization of category managers towards efficient sourcing regardless category specification.?