Category management is a part of the retail and purchase concept. It involves a wide range of products purchased by a business and then broken down into discrete categories. A simple example of category management can be categorising groceries into food, soaps, detergents, toiletries etc. Product category management is a systematic approach towards strategizing business. On the other hand, the process of identifying the spend profile of a company and making sure the business requirements are in alignment with the suppliers is called strategic sourcing.
Both strategic sourcing and category management are essential for the organisation for the procurement of products. This article differentiates between strategic sourcing and category management but also highlights the link between the two.
How is category management different from strategic sourcing: the key differences to be noted between the two are -
Category management is also known as a procurement management strategy. It is an efficient method to analyse the management of spending and cost savings. To improve business outcomes effectively you can use category management to categorise various goods and services. This categorisation is known as business units. Category management utilises structured and measurable outcomes.
Category management is used by both public and private sector businesses. The rule of thumb says that all products of the same category are to be placed together for convenience.
Examples of such categories can be :
Category management is easy to customise but the basic steps involved in category management are:
Strategizing anything defines that there is a plan and a process. Similarly, strategic sourcing denotes the method of procurement process involving the identification of the right suppliers and negotiation for the best prices available. It is one of the key factors in the process of supply chain management and revolves around optimised spending. The primary aim of strategic sourcing is to reduce costs.
Steps for implementing strategic sourcing:
|Continuously refreshed analysis
|Analysis done for immediate requirements
|End to end process
|One time process
|Includes supplier and contract management
|Supplier management program
|Includes demand management
|Does not include demand management
|Not much time required
|Similar can be implemented on other categories of products
|Different strategies for different categories of products
Once the process strategies are identified they can be used on other suppliers for introducing new products in the same or other categories. This in turn helps to streamline business or introduce new expansion plans.
If a buyer wants to buy active wear, the category is set right by using the active wera section, next he sets foot towards the lower body activewear or upper body activewear. The next decision will be ascertaining the colour and size. If the buyer finds leggings much more comforting than a trouser, then he would stick to a trouser but essentially he wanted leggings for fitness wear. Therefore if there are no multiple options in the category section then he would decide not to buy. If you have kept categories separated from each other and coordinated then it would be easier for the buyer to make decisions.
Using special categories to define the space and plan different categories in an organised way can be helpful to increase efficiency and performance of your store. As a store manager category management is the first step towards efficient business handling.
New stock can be displayed at the front windows for inviting customers and drawing attention. A constant change of displays will encourage more attention and customer flow
Apparel shopping has become a source of leisure shopping, visual appeal is very important to persuade customers to buy.
The fundamental ones are merchandise type and the frequency or range changes. This second reason is due to the impact of the fast fashion industry and its effects on consumer behaviour.
Adopting strategic sourcing for establishing a holistic approach towards procurement of products is a more proactive approach. Often it is said, precaution is better than cure, therefore to minimise potential risks during any buying of business requirements it is essential to select the right suppliers. Strategic sourcing allows to meet the right suppliers and maximise the performance of the organisation.
On the other hand, category management makes procurement of products in one category hassle-free and identifies what is the most essential requirement and clarifies the process from end to finish, thus making it more transparent. Category management in the retail and fashion industry helps to change the type and frequency of merchandise. As fashion calls for concurrent changes and is affected by the consumer behaviour category management helps to determine the best options to improve sales.
Once any business sets category management and strategic sourcing right, the whole process not only saves cost but also human resources. Time is effectively utilised and not to forget,it does not allow the organisation to lower its quality.