Welcome to the Acme Manufacturing category strategy workshop. Here, you will develop category strategy in two exercises:
- Case 1 (Bearings & Seals): Dive into spend data, contract terms, market insights, and innovation opportunities to develop category strategy for a high‑spend, high‑risk segment. Align tactical actions to corporate targets and craft a roadmap for cost, quality, risk, and innovation.
- Case 2 (Electrical Enclosures): Apply the same rigorous approach to a medium‑spend category. Use supplier positioning, performance metrics, and leap‑change concepts to develop category strategy that supports growth, margins, sustainability, and resilience.
Through these cases, you will practice how to develop category strategy by synthesizing as‑is analyses, stakeholder perspectives, and strategic objectives into actionable plans. Let’s get started!
Content…
Case 1: Develop Category Strategy Bearings and Seals
You are the Category Manager for Bearings & Seals at Acme Manufacturing. All as-is analyses have been completed. You now have the following inputs at your disposal:
As-Is Data Summary (Background & Reading Material,)
1. Consolidated Spend Data
- Total Bearings & Seals spend across all three sites: SEK 120 million per year.
- Spend breakdown by site: Västerås (SEK 50M), Malmö (SEK 40M), Esbjerg (SEK 30M).
- Average price per bearing unit: SEK 30; per seal unit: SEK 20.
- Spend trending: +5% year-over-year growth driven by expanded production capacity.
2. Current Contracts & Pricing
- Two master agreements: Supplier A (Sweden) at 14% discount, 48-hour lead-time; Supplier B (Germany) at 18% discount, 7-day lead-time with forecast commitments.
- Contract expiry: 60% of spend contracts renew in Q3 2025; remaining 40% in Q1 2026.
- Price review clauses: Annual CPI-based adjustments capped at 3%.
3. Technical Specifications & Quality Metrics
- Bearing tolerances: ±0.02 mm, sealed bearings must meet IP65.
- Seal material: Nitrile rubber, temperature range -30°C to +100°C.
- Quality performance: Supplier A defect rate 1.2%; Supplier B defect rate 1.8%.
- On-time delivery: A at 94%; B at 90%.
4. Supplier Market Analysis
- Market landscape: Five key suppliers globally; four regional (one in Sweden, two in Germany, one in China); several emerging smaller players in Eastern Europe.
- Innovation trends: Development of self-lubricating polymer bearings; predictive maintenance sensors integrated into bearing housings.
- Market consolidation: Two major mergers announced in 2024, reducing supplier diversity.
5. Performance Highlights & Pain Points
- What works well: Strong cost savings from master agreements; high service levels for standard orders; robust quality for critical dimensions.
- Challenges: Emergency orders still incur +25% premium; site-specific variance in forecasting accuracy; limited visibility into supplier capacity spikes in peak months.
6. Kraljic Matrix Positioning
- Profit Impact: High (SEK 120M); Supply Risk: Medium–High (few qualified global players, technical complexity).
- Most SKUs placed in Strategic quadrant; routine greased bearings in Leverage quadrant; specialized sensor-enabled bearings in Bottleneck quadrant.
7. Leap-Change Ideas
- Co-develop smart bearings with embedded IoT sensors to offer predictive maintenance as a service, enhancing value and differentiation.
- Establish a regional Eastern European supply hub to reduce lead-times and diversify risk.
- Launch a vendor-managed inventory (VMI) program to optimize stock levels and lower capital tied up in safety stock.
Team Profile & Context
Your cross-functional team comprises five individuals, each bringing distinct expertise and perspectives on category management:
- Anna Svensson, Category Manager: A procurement specialist with 8 years at Acme, Anna has led multiple sourcing projects but is new to formal category management. She understands spend analytics but seeks guidance on strategic segmentation and supplier development.
- Lars Berglund, Mechanical Engineering Lead: With 12 years in product design, Lars defines technical requirements and tolerances. He has collaborated on supplier selection but has limited exposure to category-level strategies.
- Maria Lopez, Operations Manager: Maria oversees production scheduling across sites. She relies on ad hoc procurement support and values reliability; she recognizes the potential of category management to stabilize supply but worries about process complexity.
- Johan Pettersson, Quality Engineer: A Six Sigma black belt, Johan monitors defect rates and compliance. He has participated in supplier audits and supports structured category frameworks to drive continuous improvement.
- Elin Johansson, Finance Analyst: Focused on cost analysis and budgeting, Elin provides spend insights and ROI modeling. She advocates for Category Management based on expected financial benefits but seeks clarity on KPI selection and governance.
Collectively, the team has complementary skills—technical, operational, quality, financial—but varying familiarity with category management principles. Use this context as you shape roles, communications, and strategy development in your approach.
Corporate Strategy Alignment
Acme Manufacturing’s overall corporate strategy for 2025–2028 emphasizes the following targets:
- Revenue Growth: Achieve annual sales growth of 8% by expanding market share in European OEM segments.
- Margin Improvement: Increase gross margin by 3 percentage points through cost optimization and value-added services.
- Sustainability Commitment: Reduce Scope 3 emissions by 15% by 2028, including sourcing from lower-carbon suppliers.
- Innovation Leadership: Launch at least two new smart-product offerings (integrated IoT-enabled components) annually.
- Operational Resilience: Maintain supply continuity with <1% production downtime due to procurement issues.
Your category strategy must directly support these corporate targets by translating them into measurable objectives and initiatives for the Bearings & Seals category.
Use this as-is data to craft a comprehensive category strategy that addresses cost, quality, risk, and innovation.
Discussion Questions (60 min)
- Based on the as-is inputs, define three strategic objectives for the Bearings & Seals category over the next 12–18 months.
- Propose a segmentation within the category (e.g., standard vs. specialized SKUs) and outline tailored sourcing approaches for each segment.
- Recommend a negotiation and contract renewal plan, including timing, target savings, and risk mitigation activities.
- Design an innovation roadmap leveraging leap-change ideas—identify key partners, investment requirements, and expected business outcomes.
- Develop a risk management plan for supply continuity, specifying dual-sourcing, buffer strategies, and geographic diversification tactics.
Class Debrief & Reflection (30–40 min)
- Groups present their category strategies, linking objectives to specific actions and metrics.
- Compare segmentation models and debate the merits of each.
- Discuss balance between cost savings, innovation investment, and risk exposure.
- Summarize how the proposed strategy fulfills Acme’s business goals and supports long-term supply chain resilience.
Case 2: Develop Category Strategy for Electrical Enclosures
You are the Category Manager for Electrical Enclosures at Acme Manufacturing. All as-is analyses have been completed for this category. You now have the following inputs at your disposal:
As-Is Data Summary
1. Consolidated Spend Data
- Total Electrical Enclosures spend across all sites: SEK 60 million per year.
- Spend breakdown by site: Västerås (SEK 25M), Malmö (SEK 20M), Esbjerg (SEK 15M).
- Average price per standard enclosure: SEK 8,000; per custom enclosure: SEK 12,000.
- Spend trending: +7% year-over-year due to new smart-factory projects.
2. Current Contracts & Pricing
- Three framework agreements:
- Supplier X (Sweden): 10% discount, 6-week lead-time, standard models.
- Supplier Y (Poland): 15% discount, 8-week lead-time, custom configurations.
- Supplier Z (Asia): 20% discount, 12-week lead-time, large orders only (min. 100 units).
- Contract expiry: 50% of spend renews Q4 2025; 50% in Q2 2026.
- Price review: Biannual indexation based on steel commodity prices.
3. Technical Specifications & Performance Metrics
- Enclosure standards: IP66 rating, powder-coated steel; optional explosion-proof certification for hazardous environments.
- Quality KPIs: Dimensional accuracy ±0.5 mm, coating adhesion test pass rate 98%.
- Delivery performance: X at 92%, Y at 90%, Z at 85% on-time delivery for standard orders.
4. Supplier Market Analysis
- Market landscape: Ten credible vendors—three in Scandinavia, four in Central/Eastern Europe, three in Asia.
- Emerging trends: Integration of embedded environmental sensors; modular enclosure systems for rapid assembly.
- Consolidation: Two regional mergers projected in 2025, potentially reducing Eastern European capacity.
5. Performance Highlights & Pain Points
- Strengths: Competitive pricing from Asia; strong customization from Poland; fast response from Swedish partner.
- Weaknesses: Long lead-times on custom builds; high shipping costs on Asian imports; inconsistent certification processes.
6. Kraljic Matrix Positioning
- Profit Impact: Medium–High (SEK 60M); Supply Risk: Medium (multiple sources but lead-time variability).
- Standard enclosures in Leverage quadrant; custom and explosion-proof models in Strategic quadrant; modular sensor-enabled enclosures in Bottleneck quadrant.
7. Leap-Change Ideas
- Co-develop modular, sensor-integrated enclosure platform with a technology partner to reduce custom build lead-times.
- Establish a local assembly and kitting hub near Malmö to shorten lead-times and reduce freight costs.
- Implement digital twin modeling for rapid design validation and supplier self-service customization portal.
Corporate Strategy Alignment
Acme Manufacturing’s corporate strategy for 2025–2028 emphasizes the following targets:
- Revenue Growth: Achieve annual sales growth of 8% by expanding market share in European OEM segments.
- Margin Improvement: Increase gross margin by 3 percentage points through cost optimization and value-added services.
- Sustainability Commitment: Reduce Scope 3 emissions by 15% by 2028, including sourcing from lower-carbon suppliers.
- Innovation Leadership: Launch at least two new smart-product offerings (integrated IoT-enabled components) annually.
- Operational Resilience: Maintain supply continuity with <1% production downtime due to procurement issues.
Your category strategy for Electrical Enclosures must directly support these corporate targets by translating them into measurable objectives and initiatives for your category.
Team Profile & Context
Your cross-functional team includes:
- You (Category Manager): 5 years in procurement, led electrical component sourcing but first full category strategy.
- Electrical Engineering Lead: Defines technical requirements and safety certifications.
- Logistics Manager: Oversees inventory, warehousing, and transport costs.
- Quality Assurance Lead: Manages certification processes and defect investigations.
- IT Systems Analyst: Supports digital integration for customization portal and data analytics.
Team members have varied experience in category management and digital tools; leverage their expertise in your strategy design.
Discussion Questions (60 min)
- Define three strategic objectives for the Electrical Enclosures category aligned to corporate targets.
- Propose segmentation (standard vs. custom vs. smart-modular) and sourcing approaches for each segment.
- Recommend negotiation and renewal strategy: timing, targets, flex clauses for customization and lead-time.
- Outline an innovation roadmap for leap-change ideas: partner selection, investment, and KPIs.
- Design a risk mitigation plan for supply continuity: dual-sourcing, local assembly hub, buffer strategies.
Class Debrief & Reflection (30–40 min)
- Groups present Electrical Enclosures strategies, linking each objective to specific actions and metrics.
- Compare segmentation models; debate the prioritization of cost, customization, and innovation.
- Discuss trade-offs between centralizing kitting hubs vs. maintaining multiple suppliers.
- Summarize how the proposed strategy supports Acme’s growth, margin, and resilience goals.
Conclusion cases – Develop category strategy:
Through Cases 1 and 2, you have practiced how to develop category strategy by integrating multi-dimensional analyses—spend data, contract terms, market insights, risk assessments, and innovation opportunities—into coherent, actionable roadmaps. Key learnings include:
- Strategic Alignment: Translating corporate targets (revenue growth, margin improvement, sustainability, innovation, and resilience) into specific category objectives ensures procurement drives broader business goals.
- Segmentation & Tailoring: Recognizing that distinct product segments (standard vs. specialized SKUs; custom vs. modular) require differentiated sourcing and supplier management approaches.
- Balance of Levers: Combining cost optimization with leap-change innovations (e.g., IoT-enabled products, local assembly hubs) balances short-term savings and long-term value creation.
- Risk Mitigation: Embedding robust risk strategies—dual sourcing, buffer stocks, geographic diversification, and contract flexibility—protects supply continuity without compromising agility.
- Cross-Functional Collaboration: Engaging stakeholders from engineering, operations, quality, finance, and IT enhances buy-in, enriches perspective, and accelerates implementation.
Most importantly, the emphasis throughout these cases has been on your learning journey, not just the final deliverables. By wrestling with real-world trade-offs, crafting stakeholder communications, and iterating on segmentation and strategy, you have honed the mindset and methods essential to dynamic, impactful category management. Remember, in procurement, the path you take and lessons you glean along the way are often more valuable than the destination itself. Apply this mindset as you continue to develop category strategy in your future sourcing challenges.