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Do You Know the Difference Between Strategic Sourcing and Category Management?

Do You Know the Difference Between Strategic Sourcing and Category Management?

Opportunity abounds in the brave new world of procurement.  Category Management is part of that. Rapidly evolving to the status of a sector game-changer, Category Management is setting the foundation for the ability of procurement leaders to strategically align with business objectives.

As procurement transforms into a service that offers value well beyond cost-cutting initiatives, Category Management is emerging as a locus of sourcing strategies which serve the greater corporate good.  And that’s great news for procurement and for the businesses it works with and for.

Big differences

There’s more than one difference between strategic sourcing and category management. But the differences are about the fundamental nature of the two styles in play.

For example, strategic sourcing fulfills a function.  It is a cup of coffee from a vending machine compared to an espresso.  Category Management is primarily strategic, taking sourcing of goods and services from a solely cost-based fulfilment model to one which serves a greater purpose in organizations.

Supplier relationships is one key area in which category management departs from strategic sourcing decisively.  Traditional sourcing sets up an adversarial relationship between buyers and suppliers – locked in combat.

Category Management demands collaborative effort to reach a common goal – better delivery results in a better profile, as does higher quality achieved through mutually-pursued innovation.

Executive support for procurement goes beyond passively viewing bottom line results.  It deploys a proactive executive tier engaged with procurement for strategic effect.

Consultative collaboration

In a recent post, we’ve discussed the branding of procurement considering its ongoing transformation to a C-level function.  Consultative collaboration is a huge component of that transformation and the secret to transitioning a Strategic Sourcing model to a Category Management one.

For that to happen, procurement must be perceived (branded) as a strategic partner.  By developing new products and markets, procurement’s role becomes one of magnified value, down to the customer engagement level.

The consultative role of procurement resides in its understanding of processes and how they can be reformed to represent a profound sea change.  By bringing knowledge to the table which is otherwise obscure and applying it to problems like supply chain transparency and managing risk through that chain, procurement gets that coveted seat at the table.

Category Management is an opportunity for business and procurement is the door behind which it waits to be unleashed.

Value-creating sourcing

Category Management represents an evolution to the next level of maturity for Strategic Sourcing.  By fostering collaborative relationships with suppliers, the nature of sourcing is fundamentally changed, creating value-driven communities of procurement.

The systematic and disciplined approach to sourcing expressed by Category Management creates key relationships with suppliers.  When your suppliers provide the bulk of similar products and services within a given category you create opportunities for tremendous discounts.  

Building relationships intentionally is the basis for successful Category Management.  With time and realized objectives like delivery, value and innovation, the fruit borne by this style of sourcing is material.

CenterPoint Group is a trusted procurement advisor, bringing our clients focused, analytical account management.

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