Develop Category Strategies

Where Procurement Theory Meets Reality

Continuing our Procurement Excellence series, we've covered understanding business context, assessing current state, and defining strategic objectives. Today, let's dive into something that's at the heart of effective procurement: developing category strategies. And yes, I know many of us think we're doing this well already - but are we really?

Why Category Strategies Matter More Than Ever

Let us be honest, how many of us have truly comprehensive category strategies that go beyond basic market analysis and savings targets? In today's volatile business environment, category strategies need to be much more than just procurement documents - they should be living roadmaps that drive value across the organization. And believe me, I know exactly how difficult it is to get this activity into our procurement DNA. But at the same time, we know how helpful it can be if the setup is right.

Let me share why this matters now more than ever:

1. Value Beyond Savings: Yes, cost optimization remains important, but modern category strategies must address innovation, sustainability, risk management, and value creation.

2. Business Integration: Your category strategies must align with overall business objectives or at least with the strategy of a particular business unit. If your company is pushing for sustainability, your packaging category strategy can't just focus on cost reduction. If time-to-market is crucial, your R&D materials strategy needs to reflect this.

3. Risk Management: The past few years have taught us that supply chain disruptions are the new normal. Decisions such as offshore vs. nearshore vs. in-house etc. have to be made in this context. So your category strategies need to address this reality head-on.

Building Effective Category Strategies

Let me share my perspective on how to develop category strategies that actually work:

1. Start with Deep Analysis

• Spend analysis

• Supplier landscape mapping

• Risk assessment

• Value chain analysis

• Market dynamics understanding

• Stakeholder requirements (and yes, this means lots of conversations)

2. Strategic Alignment

This is crucial - your category strategy doesn't exist in isolation. It needs to cascade from and align with:

• Corporate Strategy: What are the company's overall goals and direction?

• Business Area Strategy: What are the specific needs and objectives of each business unit?

• Procurement Function Strategy: How does this category support our overall procurement objectives?

In my opinion this alignment isn't just a theoretical exercise. Each decision in your category strategy should clearly link back to these higher-level strategies. For example, if your corporate strategy focuses on sustainability, and your procurement strategy emphasizes supplier innovation, your category strategy needs to reflect both these priorities.

3. Market Analysis

This is where many procurement teams just scratch the surface. You need to go deeper:

• Market Structure Analysis: Use Porter's Five Forces to understand market dynamics

• Supplier Positioning: Create a clear view of key players using tools like:

  • - Supplier Preferencing Matrix

  • - Kraljic Matrix for your category position

  • - Capability/Performance matrices

• Market Share Analysis: Understand your buying power vs. market reality

• Technology Trends: What's changing in your category's technology landscape?

• Price and Cost Drivers: What really drives costs in this category?

This understanding is absolutely crucial for developing a strategy that works in the real world.

4. Define Category-Specific Objectives

Instead of generic goals, set specific objectives that align with your strategic cascade. For example:

• Direct Materials: "Reduce single-source dependencies by 30% while maintaining quality standards"

• IT Services: "Implement innovation workshops with top 3 suppliers to drive digital transformation initiatives"

• Packaging: "Achieve 50% recycled content while maintaining cost position"

5. Develop Clear Action Plans

This is where many strategies fall short. You need specific, actionable steps:

• Who is responsible for what?

• What are the timelines?

• What resources are needed?

• How will progress be measured?

6. Consider Multiple Scenarios

In today's volatile world, single-track strategies don't work. Develop plans for different scenarios:

• Best case

• Most likely case

• Worst case

And yes, this takes time - but it's worth it when disruption hits.

Remember: Your category strategy is only as good as your understanding of both internal requirements (strategic cascade) and external realities (market analysis). Skip either of these, and you're building your strategy on shaky ground.

What to Avoid

Let me share some traps I've seen teams fall into:

1. Template Tyranny: Using the same template for all categories. Each category is unique - your strategy should reflect this.

2. Ignoring Stakeholders: Category strategies developed in procurement isolation rarely succeed. Involve your stakeholders early and often.

3. Static Strategies: A strategy document that sits in a drawer is useless. Make them living documents that evolve with market changes.

4. Over-Complexity: Yes, be thorough, but keep it practical. If your strategy is too complex, it won't be implemented.

Making Your Category Strategies Work

Here's how to ensure your strategies drive real change:

1. Regular Reviews

Set up cyclical review sessions with key stakeholders to:

• Check progress

• Adjust to market changes

• Address emerging challenges

• Celebrate successes

2. Clear Governance

Establish who:

• Owns the strategy

• Is responsible for implementation

• Needs to be consulted

• Should be informed

3. Measure and Communicate

Define clear KPIs, but remember:

• Mix leading and lagging indicators

• Include both quantitative and qualitative measures

• Regularly communicate progress to stakeholders

Innovation in Category Strategy

In my view, this is a point that will be decisive for the role and quality of procurement. Your category strategies should drive innovation:

1. Supplier Innovation

• Regular innovation workshops

• Joint development projects

• Early supplier involvement in new products

• Technology roadmap alignment

2. Process Innovation

• Digital transformation opportunities

• Automation potential

• New ways of working with suppliers

A look into the future

Category strategies are not static documents - they need to evolve with your business and market conditions. The key is finding the right balance between structure and flexibility, between thoroughness and practicality.

Remember: A good category strategy isn't about following a template - it's about creating a practical roadmap that drives real value for your organization.

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What are your experiences with category strategies?

How do you ensure they remain relevant in today's fast-changing environment?