Transforming Procurement by making complexity manageable with AI-powered Category Management technology

“Category Management is dead!” was a shocking opener from Dr. Elouise Epstein for her keynote at the Cirtuo Procurement Forum 2023 a few weeks ago. But there couldn’t have been a better way to open a Category Management Conference and spark the conversation.

We sat down with Dr. Epstein to discuss the recent developments in Procurement, the role of Category Management in conquering the rising complexity and expectations toward Procurement, and the impact of AI and technology on the future skillset of procurement professionals.

Some say Category Management has never really been alive, or at least thrived, in its traditional form. Teams struggled with the effective execution of comprehensive category management since its inception. “The way it (Category Management) is done today, mainly in Excel and PowerPoint, is actually the traditional way, but the business requirement have changed significantly, the world has changed, there is a disruption.” said Drasko Jelavic, CEO and Founder of Cirtuo.

Managing spend categories strategically requires a clear definition, methodology, and structure for doing so, discipline, strategic management and interpersonal skills, and technological support. That’s a lot of things that need to come together – and they usually don’t.

To effectively manage the growing complexity in Procurement, we must develop new approaches to Category Management. With a high number of categories and suppliers, along with corresponding stakeholders, frequent changes in business requirements, and market challenges, a fresh perspective is needed. “Procurement and category managers need to get much closer to the stakeholders as it got all much more complex than it was in the past. It’s probably impossible to manage it with Excel and PowerPoint,” Drasko continued.

The process of strategy development, validation, and implementation calls for a new approach, a different mindset, and for the support of AI-enabled technology. “Category Management has been on a journey and it’s actually over and we are moving on to the next generation of Category Management,” added Dr. Epstein. “I like to joke that ‘Category Management is dead’ because we’ve spent decades chasing PowerPoint, putting it in SharePoint, trying to create dashboards – and then Drasko actually came along and automated it, made it so that you could just click a button, and have a category strategy, which has fundamentally reshaped how we think about Category Management.”

This perspective was underpinned by the recurring emergence of business requirements as the ideal cornerstone of all procurement activities. “The business requirements have significantly increased. We now have ESG, diversity, growth, and governance. There are simply new topics which are now expected for procurement to deliver”, mentioned Drasko. “If you have 30,000 suppliers, you all of a sudden have to manage risk, you have to manage cost, you have to manage ESG, this cascade of legislation, and 40 other things. That’s a lot of data to collect, manage, and process. So the job has gotten bigger”, Elouise added.

In our future vision, procurement professionals become strategic advisors that leverage technology, data, and insights to drive innovation and create value for their organizations. “The question is how to achieve the transition from sourcing-minded procurement or a procurement-centric attitude to the attitude where you actually have to work with the stakeholders and identify and align all the business requirements. Because this is what defines your category strategy and any other strategies in procurement,” said Drasko. This customer centricity is also the underlying concept of the Cirtuo Strategy Alignment Matrix (SAM), which he introduced during the webinar “The future of Category Management”.

Drasko highlighted the enormous complexity inherent in the constantly changing business requirements and market realities, the number of categories, suppliers, and strategic initiatives. “I think the only way forward is to use more sophisticated tools and to bring that to bear because we’re not going to hire enough people” to get the job done concluded Elouise.

But what does this mean for the future role of Category Managers in a world of advanced Category Management technology? “When I say ‘Category Management is dead’, I’m really saying we need to move to category intelligence. And category intelligence is where you can pull all these disparate data sources together and start to create intelligence about your supply market, about how your category’s performing when you should go to market”, explained Elouise.

“If Drasko can give me all of that today, that’s still only half the equation, because ultimately, business is about relationships” continued Elouise. Drasko added that “Category Management will remain a mix of human intelligence, market intelligence, artificial intelligence. And it’s more important than ever to manage the stakeholders, especially as there is a disruption”. We expanded on the capabilities required for being successful in Procurement and our perspective for improving stakeholder alignment in the webinar “The future of Category Management”.

The keynote of Dr. Epstein is now available alongside all other keynote speeches and panel discussions from the Cirtuo Procurement Forum 2023.

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