Blog
Sep 16, 2023
Best practice approach to implement a Category Strategy Process that converts into actionable initiatives and measures
4
min
Imagine driving through an unfamiliar area with a clear destination in mind and on a schedule but without a map. It‘s not something a lot of people would do. Procurement teams today have to navigate complex business environments in order to fulfill stakeholder expectations. Very often they do so without a strategy, which is much like driving without a map.
An ever-changing external environment requires procurement to have a clear plan of action that is easy to execute but can quickly be adjusted if market dynamics change. Category strategies can help procurement navigate complex business environments, providing it with the necessary tools and methodologies. But strategy creation, much like getting ready for a journey, requires proper preparation and some experience.
In today’s competitive business environment, adopting a comprehensive category strategy isn’t just an edge—it’s an imperative. A holistic view, one which considers all parts of a system, is vital. There are many ways to create category strategies, but Cirtuo has developed a tried and tested process for creating holistic category strategies. Holistic category strategies help category managers create strategic business alignment while balancing business requirements and cost-saving opportunities.
Category strategies are a methodical approach to assessing and planning how to best acquire goods or services for a business. Its objective is to help companies align business requirements with market realities to optimize cost, thereby identifying purchasing opportunities and creating business value. Implementing a category strategy requires breaking it down into actionable steps that enable effective decision-making.
Category management isn’t just about evaluating how much you spend or how well you work with your suppliers. It’s primarily about understanding what the business needs, knowing how the market works and anticipating any potential risk or untapped opportunity. It’s like piecing together a puzzle where every bit of information helps create a clearer picture.
Without the right strategies in place, category managers could make poor award decisions when sourcing, miss saving opportunities, or not meet business objectives. Category strategies act as a north star through complex business and market environments. They give direction and present opportunities for optimization. Equipped with holistic category strategies, procurement teams are able to quickly and effectively respond to changing business needs or market changes – and to maintain a competitive edge.
The Cirtuo strategy development process can be broken down into four distinguishable steps: the Internal Analysis, the Market Analysis, Strategizing & Validation, and finally, the Implementation.
Understanding what’s happening inside one’s own business is the first step in the strategy development process. A robust internal analysis includes elements such as scoping and business mobilization, spend analysis, supplier preferencing and the understanding of business requirements (RAQSCI). Taking stock of organizational needs, goals, and challenges through a structured analysis ensures a customized strategy is created.
The next step involves a comprehensive analysis of the external market. This includes examining available suppliers, evaluating the categorie’s cost structure and assessing macroeconomic factors, alongside risk. Category insights can be gained by using tools and frameworks such as Porter’s 5 Forces, the Kraljic Matrix and SWOT, while macroeconomic risks and developments are assessed through the use of a PESTLE analysis. Supply market intelligence providers such as Beroe and The Smart Cube offer access to real-time intelligence on market and price movements to support this step.
The third step in the process, developing and validating strategic options, involves defining goals, ideating the various pathways to achieve them, and selecting the best opportunities to meet business needs. Validating the strategic options is essential for its success. This involves assessing the feasibility of strategies in the market, and ensuring alignment with business needs.
Converting the agreed strategy into actionable initiatives and measures is the final step in the category strategy development process. It involves creating an initiative roadmap and utilizing a structured plan for execution, including reporting to track progress and performance.
In a complex business environment and ever-shifting supply market, lacking a strategic approach to managing categories inevitably leads to missed opportunities and wrong turns. By following a structured strategy creation process, procurement teams are able to successfully navigate both internal and external complexities and identify the best initiatives to meet business objectives.
The process of creating a best practice category strategy using Cirtuo’s proven methodology and interview-style user experience, ensures that all procurement professionals are equipped to make holistic decisions that deliver business impact and value. Cirtuo is the pioneer in digitizing category management with the Guided Strategy Creation platform. The structured framework combined with AI-powered technology offers a solution that enables category managers to build holistic category strategies and initiatives that satisfy business requirements.
Learn more about the process of developing category strategies with our deep dive blog explaining the developing and validating strategic options.
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