Using SRM to Automate Category Management
Implementing category or commodity strategies leads to optimized business efficiencies. Maintain contractual and business relationships with suppliers, and facilitate implementation of procurement change initiatives within categories to improve business performance.
Does the following all-too-common scenario sound familiar to you?
For example, the manufacturing team has a category manager who is doing a terrific job. She and her team are reporting multiple metrics around their raw materials. They’re keeping tabs on many aspects of how these commodities are moving along the supply chain.
That’s the good news. The bad news is that these very talented, highly-compensated experts are not devoting the bulk of their efforts to analyzing data, drawing insights, and making decisions. Instead, more than half of their time is being spent seeking and collecting data and compiling it into a usable format so that the “real work”—i.e. the work that actually creates a significant ROI for the business—can be done.
To make matters worse, periodically members of this team, or even the category manager, leave the organization. Every time this happens, a wealth of category-specific expertise about where to obtain information and how best to compile it goes out the door.
We’ve seen this costly procurement category management problem play out at many organizations. Luckily, it does not have to happen at yours.
Why has category management been so challenging?
Category management is a time-intensive, project oriented activity that requires specialized data expertise and analytical skills. As a result, the work has been costly to develop. Then, once the effort is made to do this work, the outcome of each planning cycle tends to become quickly outdated.
Why? Because procurement had been challenged by Kraljic to become “supply management.” The urge to be more strategic and see the forest instead of the trees. Consequently, category managers have been bucketing suppliers into categories and creating strategies and knowledge optimal for that group….mostly.
Category management automation provides a wealth of benefits
The good news is, you don’t have to have your high-paid specialists spend hours seeking, collecting and compiling information. Instead, you can implement the category management automation that is built into your SRM and use this to establish automated feeds that bring internal and external information directly into your Supplier Relationship Management (SRM) system. Compiling this data into a usable format on the dashboard, ready for analysis and review in real time is the right approach.
To save even more time, rules can be created around what ought to be done when certain conditions materialize. For example, if a price increases more than X%, or a KPI score drops below a certain level, an alert can be generated that prompts the procurement team to investigate further.
Category management automation results in much faster reaction times
Automation enables much more efficient use of your skilled team members’ time. It also transforms category management into dynamic and continuous activity.
With manual processes, seeking, compiling, and analyzing data is typically a cyclical activity. Once each quarter the information is collected and decisions are made.
In contrast, with an automated data feed, you always have the latest information available at your fingertips. This facilitates real-time reactions to changing market conditions. Say for example, there’s a new shortage of a particular commodity or a trend of low performance. Wouldn’t you like to be the first to be alerted to this type of change? After all, you gain a lot of benefits by being able to react before your competitors do.
To conclude, category management automation will help your procurement organization:
Increase the efficiency of procurement team members
Advance supplier development
Align with company strategy
Reduce risks and improve performance in your supply chain
The LUPR Supplier Relations and Performance Management tool can play a crucial role in the category management automation process by integrating your internal and external information and analyzing it in customized dashboards. In addition, alerts and notifications can be set in advance so that your team can easily stay on top of any change.
This article was written by Sean Harley. co-founder and CEO - LUPR Inc. and Vered Semel co-founder and Head of Marketing - LUPR Inc.