As organisations increasingly adopt mature category management practices, new data reveals significant gains in cost savings, risk mitigation, and stakeholder collaboration—if fully realised.
Category management (CatMan) in procurement has emerged as a strategic discipline that transforms how organisations approach their external spend. Unlike isolated purchasing decisions, CatMan treats procurement categories as distinct business units, orchestrating activities and s...
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upplier relationships in a way that adds value, anticipates market trends, mitigates risks and adapts to changing demand and supply conditions.
The distinction between category management and strategic sourcing is important for understanding CatMan’s scope. Whereas strategic sourcing focuses on immediate cost savings through competitive supplier selection and contract negotiation for specific events, category management takes a long-term, holistic view that spans multiple procurement cycles. CatMan is proactive and context-driven, aligning category strategies with broader business goals, risk management, innovation, and sustainability. According to research by The Hackett Group, strategic sourcing tends to be reactive and short-term focused with a cost-compliance mandate, while category management is positioned as a mature, value-driving function that engages closely with stakeholders across the organisation.
The rationale behind category management stems from procurement’s unique position bridging internal business needs and the external supply ecosystem. By organising procurement along category lines, organisations can better coordinate spending, deepen supplier relationships and generate greater overall value. According to CAPS Research’s ‘Playbook for Category Management,’ key motivators to adopt CatMan are creating business value, cost reduction alongside supply chain risk mitigation, innovation enhancement and streamlining buying processes.
Practical benefits widely acknowledged include better strategic alignment with business objectives and enhanced stakeholder engagement through co-created category strategies. Deeper supplier insights and collaborative partnerships foster innovation and continuous improvement. Category management also optimises spend under influence, enabling more sophisticated negotiations and proactive risk management—essential for business continuity. Environmental, social and governance (ESG) objectives increasingly feature as central goals within CatMan frameworks, reflecting the broader sustainability agenda in procurement.
Concrete evidence underscores the effectiveness of category management. CAPS Research found that 78% of companies report cost reductions through CatMan, while 50% see improved internal relationships and nearly a third realise benefits in supplier relations and risk reduction. In addition, Deloitte’s survey highlights an average 12% cost reduction for adopters, and The Hackett Group reports organisations with mature CatMan capabilities experience 7% revenue increases and up to 20% lower procurement costs combined with significantly shorter procurement cycles. These figures reinforce the strategic value of category management in driving operational efficiency and competitive advantage.
However, research also reveals a performance gap. Despite its potential, many organisations do not fully capture CatMan benefits due to varying maturity levels. CAPS Research categorises formal CatMan maturity from minimal (4%) to extremely formal (13%), with most organisations falling below advanced levels. The Hackett Group’s ‘2024 Spend Orchestration Study’ corroborates this, showing the majority of companies operate at low or medium-low CatMan maturity. Furthermore, Future Purchasing’s 2024 global leadership report highlights a critical disconnect: 69% of stakeholder value and 68% of risk reduction opportunities are missed, only half of spend is covered by formal category strategies, and a significant proportion of stakeholders lack clarity or agreement on their CatMan roles.
Category management’s success depends heavily on organisation-wide collaboration, data-driven decision-making and alignment with business strategy. Tools such as Gartner’s Category Strategy Builder are designed to streamline strategy development, monitor value delivery with tailored metrics, and improve communication of category plans, helping overcome some of these execution challenges.
In conclusion, category management stands as a central procurement discipline pivotal for transitioning procurement from a cost-focused, transactional role to a strategic business partner. It offers comprehensive advantages including cost savings, risk reduction, supplier relationship enhancement, innovation, and sustainability. Nevertheless, organisations must invest in formalising processes, stakeholder engagement and leveraging sophisticated analytics to unlock the full potential of category management and avoid leaving significant value on the table.
Spend Matters will continue to explore how organisations can refine CatMan execution, illuminate best practices and examine supporting technologies in upcoming coverage.
Source: Noah Wire Services
