Category management is back in the spotlight, and business leaders have made it clear: it’s time to move on from manual processes and go digital. The benefits go far beyond automation. Digitalization will transform category management from a disconnected, inconsistent state into a more strategic, agile, and fluid business function.
After a decade-long stretch of relative stability in procurement, the disruptions from the past several years have forced businesses to reevaluate their sourcing strategies. Disciplines that had fallen by the wayside during this quiet period became more important than ever in a newly chaotic environment. Category management is one of the strategies now resurfacing to help organizations address many of the challenges that have plagued supply chains across the globe.
We’ve seen the overall procurement function having its moment as companies begin to realize how implementing a cohesive, efficient spend strategy can positively impact business goals. Category managers, specifically, can expect to see the breadth of their responsibilities widening soon – if they haven’t already. They will be expected to identify risks and assist with creating and maintaining supplier relationships to help meet sustainability and diversity goals as category management and supplier management come closer together.
Here at SAP, we’ve already heard from business leaders that category management is an essential part of a modern spend strategy. Research by Economist Impact, sponsored by SAP, highlights category management as a key driver of digital transformation in procurement.
Businesses need to implement a scalable category management strategy to neutralize risks, increase cost savings, and deliver value to stakeholders. Digitizing category management is crucial to replace manual processes, which frees up procurement teams to focus on strategy creation and implementation.
On the Horizon: A New Way to Drive Category Management
In the coming months, SAP plans to roll out a new category management solution that enables businesses to better manage categories, define strategic frameworks, and execute important initiatives that strengthen strategic impact and agility across the source-to-pay process. Our vision is to deliver the following:
One unified platform with in-depth insights
A unified platform that seamlessly integrates with sourcing, supplier, and risk management systems can provide intelligent insights about past spend and market activity to guide future outcomes. Currently, category managers do not have access to a single view of procurement activities. Access to one centralized space would allow for big-picture strategy development without the time sink of a largely manual workload.
Consistent, high-quality data
Consolidating category naming conventions and using uniform, company-wide classifications for goods and services will help provide high-quality data for analysis, eliminating confusing, varied naming schemes. Access to quality data, organized by subcategories, suppliers, and regions, can result in improved compliance and segmentation accuracy. Until now, mapping purchased goods and services to a category has historically been a manual process using data from multiple sources, often including internal and third-party solutions and databases.
Powerful frameworks for strategy development
Category managers will soon have access to several strategy development frameworks to help with everything from evaluating market dynamics for a chosen category to providing automatic suggestions of opportunities and consolidation for categories. Industry frameworks that assist with risk assessment and cost structure will provide actionable insights that identify risks and drive savings. The need for consistent frameworks to create and execute initiatives has gone unanswered, until now.
The ability to set goals and track initiatives quickly
A reliable way to track progress is essential to measuring the success of organizational goals and initiatives. Businesses will be able to reliably monitor the status of sustainability and supplier diversity metrics to measure the achievement of environmental, social, and governance (ESG) goals in a particular category. Currently, organizations that use multiple platforms are facing a disjointed view of progress towards measurable targets and cannot reliably track compliance to strategy, especially not category-specific compliance.
Resilience and flexibility
Organizations will soon have the necessary tools to map the supply chain, analyze industry-specific data, create “what-if” models with sample strategies, and ultimately bridge the gap between procurement teams and business planning. Today’s global supply markets are chaotic, fluctuating spaces. Category managers are constrained by the time required to gather and analyze data, preventing them from influencing strategy and delivering value.
It’s Time to Take Category Management Digital
We know digitalization is the future of an unshakeable procurement strategy. Replacing disparate business processes with automated solutions and updated processes based on industry best practices can only lead to better time management and more strategic decisions. Today, we are seeing businesses addressing this need for digitization in category management one small fix at a time. However, as of now, there remains a need for one unified solution that can empower category managers to influence each element of their business goals, without spreading them too thin.
A category management solution will allow teams to automate category management, classify entries consistently, and analyze the valuable data without losing sight of critical outcomes. When software takes care of those requirements, managers can have more free time to provide guidance, lead, and execute initiatives that maximize value and minimize costs.
Stay Tuned for More
Stay tuned to learn more in the coming months about how SAP’s new solution, SAP Category Management, can help organizations completely transform their category management strategy. Read more about SAP Category Management and learn how you can get started.
Salvatore Lombardo is senior vice president, chief product officer, and head of Engineering for SAP Procurement.