This is an editable presentation of Category Management in procurement. The presentation explains the ways of creating categories and provides several examples of category creation in different businesses. It also gives the main pros and cons of category management. Feel free to use the presentation for your training and change it as you wish.

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2. Category
Management
Zoran Kecman, MCIPS
25th July 2020.

3. What are we going
to talk about today
History and
Definition
Creating categories
Using Kraljic to create
categories
Pros and cons Example 1
Example 2 Example 3 Example 4 Key Takeaways

4. History
• Category management originated in Marketing in the 1980-s
• In the following years automotive industry procurement teams started to use the
concept
Definition
Categories – general families of purchased product or service (Monzka et
all.,pg195, 2009)
CIPS definition:
Category Management is a strategic approach to procurement where
organisations segment their spend into areas which contain similar or related
products enabling focus opportunities for consolidation and efficiency.

5. Creating
categories
Similar products / services:
° Construction materials
° IT
° Transportation
° Grains
How the products/services are used in the business
° Directs – main materials
° Indirect
By Geography
° Regional procurement team
Matrix teams

6. Using Kraljic to
create categories
A separate category
manager for one
item
One CM
could cover
several
groups

7. Pros
° Better sourcing plan by category
° Specialization allows for better
knowledge about the market
° Provides significant improvement in
case of multi-location businesses
Cons
° Creating categories takes time and it is
difficult to change later
° Silos effect – lack of cooperation
between category teams, reducing
potential synergies
° Relatively difficult to hire category
managers and difficult to switch jobs
Pros and cons for Category Management

8. Example 1
(aconstructioncompany)
Classic categories:
• Building materials
• MEP materials
• Subcontractors civil work
• Subcontractors interior
• Hired labor
• Transportation, food, accommodation
• Office & IT

9. Example 2
(agrainprocessingplant)
Direct materials
Rice (80%)
Other grains (20%)
Packaging
Indirects
MRO (maintenance, repair,
operations)
Logistics services
Other indirect costs

10. Example 3
Catering
Buyer 1
All direct
• Food
• Packaging
Buyer 2
Production
consumables
F&B
consumables
Admin
consumables
IT
Operations
Transp
ort
Buyer
3
Facilities
Maintenance
SafetySecurity
Quality
control

11. Example 4
Category manager
• Analysis and
planning
• Creates strategy
• Key supplier
management
Execution team
(not category related)
• RFP / Tender
• Contract
negotiation
• Performance
monitoring
Transactional team
(not category related)
• Issues PO’s
• Invoice – to –
pay
Category manager takes care of the complete S-2-P cycle for his category:
NEED - SOURCE – CONTRACT – PROCURE - PAY

12. Key Takeaways
ONE:
Category Management is
widely used in procurement
TWO:
Create the categories wisely
THREE:
Cooperation between
category teams is important
FOUR:
Think about your career
from Category perspective

13. Thank You
LinkedIn
www.linkedin.com/in/zorankecman
Twitter
@ProcurementB
Email
zoran.kecman@outlook.com
Web
http://procurement-
basics.blogspot.com/