{"id":5983,"date":"2021-01-19T10:36:34","date_gmt":"2021-01-19T10:36:34","guid":{"rendered":"https:\/\/merlinsourcing.com\/?p=5983"},"modified":"2024-10-09T09:52:42","modified_gmt":"2024-10-09T09:52:42","slug":"categorising-is-saving-using-category-management-to-achieve-sourcing-strategy-goals","status":"publish","type":"post","link":"https:\/\/merlinsourcing.com\/de\/blog\/categorising-is-saving-using-category-management-to-achieve-sourcing-strategy-goals\/","title":{"rendered":"CATEGORISING IS SAVING \u2013 Using Category Management to Achieve Sourcing Strategy Goals"},"content":{"rendered":"
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In any business, procurement is the function that manages one of the largest expenses in an organization-Goods and Services spending. The spending can be for daily business activities, investment in long-term assets, or even office equipment.<\/p>\n<\/div>\n\n

Imagine a shoe manufacturing company. They get orders from big brands across the world. To make the order processing simpler, the management decides it’s best to open three different factories. One to process orders from Europe, one from Asia and one from North America, each is managed locally by a General Manager.\u00a0Each\u00a0GM is responsible for\u00a0handling the\u00a0sourcing needs of their own factories.\u00a0<\/p>\n\n

Assume that stationery is required\u00a0in the factories. Even though it is a requirement, it is not a priority as far as the managers are concerned. Suppliers know that the\u00a0GM is not going to waste his time looking at stationery deals. So, they quote higher prices and get quick\u00a0orders. They can do this three times for three factories and get a good profit. And the shoe company does not know that they just overpaid for\u00a0some\u00a0pencils\u00a0and\u00a0notepads.<\/p>\n\n

Regardless of the\u00a0purpose, an\u00a0organization\u00a0must\u00a0have\u00a0a strategy in place to ensure that the spending does not get out of hand. And this strategy involves segmenting the goods and services into groups based on their functions. This segmenting process is called category management<\/strong>.\u00a0<\/p>\n\n

In order to\u00a0have a\u00a0sustainable\u00a0sourcing strategy,\u00a0companies should have a structured approach to Category Management. If\u00a0the supplier wants to sell stationery to the company, they\u00a0must\u00a0go through one person\u00a0(or group of\u00a0persons in case of very high volumes or complexity).\u00a0This\u00a0person\u00a0has\u00a0a good understanding of the category and can\u00a0achieve\u00a0an\u00a0optimal\u00a0price\/value\u00a0for these goods or services. This way GM\u2019s can focus on their priorities and\u00a0the\u00a0company\u00a0can\u00a0save time and money.\u00a0<\/p>\n\n

The scenario above explains the situation of buying stationery.\u00a0The shoe company would have been able to save some money on stationery.\u00a0Imagine how much can be saved by implementing the same process in larger spending areas, like industrial products or shipping.\u00a0And remember, each penny saved is adding to the profit of the company.\u00a0<\/p>\n\n

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