You have just been assigned to a new role: category manager. Congratulations! Like many other category managers, you may be wondering what information you need, how to organize the development of a category strategy, how to build a team to create a strategy, and what tools you need to use to assess the massive amount of incoming information.
Strategic category management stems from the recognition that a single technique to identify and select suppliers is limiting and insufficient. The purpose of strategic sourcing is to obtain the right supplier for your company’s need, taking into account competition, market dynamics, supply reliability, switch-out costs, and similar factors.
Effective category strategies address specific challenges that exist for sourcing a category of goods and services, including the following:
- How should we position the category relative to market complexity and criticality?
- What are the strategic alternatives to sourcing this category in the market?
- What are the necessary change tactics required to deploy this program?
- How do we communicate the market position to stakeholders?
- What is the appropriate supplier relationship strategy for this category?
Category management consists of five to seven steps, including stakeholder engagement, market intelligence, strategy development, negotiation, and contracting. The third element, category strategy development, involves utilizing a number of tools to depict various elements of the sourcing situation. These include category portfolio analysis, supplier preference assessment, supplier segmentation, and a Porter’s Five Forces analysis. You can use these tools to develop an optimal category strategy.
There are also a number of strategic levers that you can apply, and there are advantages and disadvantages to various approaches, including price negotiation, long-term supplier contracts, and specification changes along with supplier involvement in development of specifications. These approaches can provide fruitful avenues for cost reduction and risk minimization.
You will also need to know how to evaluate different business opportunities using an opportunity-complexity assessment. This approach can also be followed up with a tactical deployment plan element, as well as communication planning and project planning.
How well do you really understand the components of category strategy development? The Accenture Academy course Developing Category Strategies provides a cohesive, direct process that you can apply to build a category strategy. The approach utilizes clear industry examples and provides a foundation for you to build a solid category strategy approach.