Category management begins and ends with stakeholders
While not always the case, companies often use category teams to develop supply management strategies. Supply management strategies often apply to categories—general families of purchased products or services. Examples of major category classifications might include castings, electronics, motors, or wiring harnesses.
These are some of the big, complex categories that are ripe for strategic sourcing initiatives. However, there are also many different “minor” categories of spend that still need to be managed, but may not fall into the basic need for a major category strategy. Examples might include paper or MRO items.
Category strategies, by definition, need to include stakeholders as part of the team. For instance, if the team is tasked with sourcing engines, then it makes a lot of sense to include people from operations as well as engineering and marketing to forecasts, establish guidelines for selecting suppliers, understanding new product introduction requirements, etc. In general, as the customer impact of the category increases, it becomes more important to involve key cross-functional team members. These individuals may be part of an “Extended Category Team”, in that they come together on a periodic basis at key points in the decision process, when much of the data is collected and consolidated for them to review. Together, the category team will develop a commodity strategy that provides the specific details and outlines the actions to follow in managing the category.
A general guideline to follow is that category strategies derive their direction from business unit and corporate level objectives for success.
Before initiating any category strategy, there MUST be buy-in from the key stakeholders, especially at the senior leadership level. Without executive commitment, strategic sourcing results are unlikely to be successful. To ensure buy-in of the corporate team, supply management must clearly define the “prize” or carrot at the end of the tunnel, to obtain the go-ahead to pursue the strategy. To enable an effective category strategy, the team must:
- Allocate resources initially, including assessment of current spend, data collection, market research, training, and people.
- Validate the savings or contribution to other company objectives achieved by supply management and drive them to the bottom line.
- Sustain the initiative through presentations to senior executives who support the move towards an integrated supply management function with other functional groups in the supply chain, including marketing, research and development, and accounting.
To be perfectly clear, it is imperative that category team leads establish their direction for building strategies directly based on business unit requirements. Supply management, in general, needs to build strategies that enable businesses to be more successful in developing new forklift solutions that provide the best value to customers, and meet corporate objectives for cost savings, revenue, and shareholder value
When in doubt, view every decision from the point of view of the customer (stakeholder).
By applying this rule of thumb, you will find it is much easier to consider and evaluate issues that arise as you work through your category plan. By no means is this an easy undertaking. You will struggle with data collection, project scope creep, and uncertainty in decision-making. However, by applying your best judgment to these situations, you are more likely to develop a plan that will not only meet stakeholder requirements, but will exceed their expectations and have them coming back for more!