“Sometimes I am told that category-based purchasing is only about “saving money”. It is a very limited perspective that does not capture the larger role that category management can, and should, play in and for an organization. I will therefore try to reason a little more broadly about the types of effects we can achieve with category management, so what is Category Management?“

Blogpost by Per-Arne Jonsson, senior consultant at EFFSO.

What is Category Management

Category management is…

• …a structured and methodical cross-functional change process with a strategic perspective… (WORKING METHOD)
• …such as based on a function-based segmentation of the business’s external costs with a supplier market perspective… (BASIC)
• …adds value in line with the business’s overall goals and strategy in the short and long term (GOALS)

I will focus on the last of the three parts in my further reasoning – adding value in accordance with goals and strategy in the short and long term.

It is therefore about creating results in accordance with the organization’s mission and overall objectives in relation to citizens, users and customers. Exactly what those goals are can vary between different organizations. It can, for example, differentiate between the private and public sector depending on the organization’s mission. It can also differ depending on the situation and type of business. But often the types of goals overlap. This applies, for example, to areas such as efficiency and sustainability, where there are objectives in some form in most organizations regardless of activity.

Category management delivers results in five areas

1. Function and quality

In order for the business to function smoothly, it is important that what is purchased works well and facilitates everyday life – regardless of whether it is goods or services. Otherwise, the risk is that we will not succeed in fulfilling the organization’s mission – regardless of whether it is to create profit for a company or provide good service to citizens in a municipality.

In order to achieve good function and quality, fact-based mapping and analysis of one’s own needs and what the supplier market can offer is needed.

2. Cost effectiveness

This is where people usually talk about “saving money”. It is an important goal for all organizations, but not in terms of saving money for the sake of saving, but to free up financial resources for the core business or other priority things. It’s about not paying more than you need for something.

The way there is via relevant analyses, wise solutions and well-functioning competition.

3. Resource efficiency

No organization has unlimited human resources. Therefore, we need to work smart. There are two aspects to the concept of resource efficiency – focus and efficient work.

The focus is about spending the most time on the things that have the most effect, for example by gathering strength around category initiatives where the biggest and most relevant results can be achieved in the shortest time.

Effective work is about having processes and tools that facilitate the category management work, but also that everyone works according to the same process so that you increase your skills and can also benefit from each other’s expertise.

4. Innovation and new solutions

In a changing world, yesterday’s solutions are not always enough for the new situations that arise. New requirements also mean that we need to seek new solutions. These are often found with various players on the supplier market, they have expert knowledge and experience that we ourselves do not have.

Therefore, we must have good knowledge of the supplier market and we need to have an active collaboration with various actors.

5. Sustainability and social aspects

The demands and ambitions in these areas have increased sharply in recent years. If we want to make a difference, we need to have a strategic and long-term perspective where we early on include sustainability and social aspects in our purchasing work.

It is about making conscious and well-founded surveys, analyzes and strategy choices. 

Other positive effects of category management

• Category management is based on a fact-based methodology, clear documentation of work and results and well-defined decision points, which creates predictability and transparency. Category management provides better opportunities for good management and control.
• A side effect that is often forgotten is how the fact-based cross-functional way of working affects people’s behaviors and internal collaboration.
• When you work together across functional boundaries in a methodical and involving way, participation and commitment are created. People are listened to and given a chance to influence. In addition, competence development is created around such important things as mapping, idea generation, analysis and change work.
• It is also common that the cross-functional way of working creates new contacts, better understanding and increased cooperation between different units in the organization. This in itself often leads to increased efficiency and quality in the daily work on several levels.

The basic approach

But what is it that allows category control to achieve these effects? It is not just, a process, a control model or something else that in itself creates results. It is about several things that must work together based on a basic approach. Category management is based on a number of basic elements (according to Jonathan O’Brien) that need to permeate the work:

• Strategic perspective.
• Know and understand the market.
• Drive change.
• Focus on breakthroughs.
• Customer/citizen focus.
• Cross-functional work.
• Fact-based work.

It is these elements that, translated into practical work, help us achieve results in accordance with the organization’s goals.

“And remember – if we want new results, we need to work in new ways.“

/Per-Arne Jonsson, senior consultant at EFFSO

What is Category Management – learn from EFFSO.

If you want to learn more about Category Management, EFFSO provides an online basic level course.

Link to the original text of the blogpost “What is Category Management” in Swedish at EFFSO homepage. 

About Learn How to Source

Learn How to Source is an online platform based in Sweden, offering a range of procurement courses accessible globally. It serves as a community where procurement experts share their knowledge through online courses, designed for various experience levels from introductory to expert. Courses are concise, about 30 minutes each, and cover different aspects of procurement, tailored for different buyer roles. The courses focus on practical knowledge, presented by seasoned professionals, and include quizzes and certificates. They can be accessed from any device, emphasizing microlearning for flexibility and efficiency.

Note: Illustration to the blogpost “What is Category Management? Learn from EFFSO” is the EFFSO logo.

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