From Transactional Buying to Category Management
What changes when a buyer stops processing orders and starts managing a whole area of spend as one business decision.
12 min
Activities: 0 of 2
Two ways to buy the same things
Picture two buyers in the same company. The first one receives requests, finds a supplier, gets a quote, raises a purchase order and moves to the next request. Every order is handled well, but each order is a separate event. Nobody looks at the total. The second buyer looks after one area of spend, such as industrial valves or IT hardware, for the whole company. She knows how much is spent each year, who uses it, which suppliers supply it, how the market works and what the next three years should look like.
The first buyer does transactional buying. The second does category management. Both are needed, but they create very different value.
What category management is
Category management is a way of organising procurement around groups of related goods or services, called categories, instead of around individual orders or individual sites. Each category is managed as a small business. It has an owner (the category manager), a fact base (spend, demand and market data), a written category strategy for the next few years, and a plan to carry that strategy out and review it.
Strategic sourcing is the analytical work inside that cycle: understanding needs, analysing the market and costs, choosing how to source, and setting up the supply arrangement. Some organisations use the two terms almost as one. In this course, strategic sourcing is the method and category management is the way the work is organised and kept going over time.
What changes when you move to categories
Transactional: the single order, done quickly and correctly. Category: the total need, the total cost and the supply market over several years.
Why organisations make the move
Which statement best describes category management?
Where should the buyer spend time?
A new procurement lead at Brenlow Engineering (an invented company) finds that her team of five spends most of its week chasing quotes for small orders of office items, tools and safety boots. At the same time, three large subcontract categories worth most of the spend are renewed each year by whoever has time, with no market review.