Strategic Sourcing vs Category Management - Procurement People
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Strategic Sourcing vs Category Management

Having worked in Procurement recruitment for 7+ years I have heard the term Strategic Sourcing and Category Management near enough on a day – to –day basis from clients and candidates alike. As such, when a Trainee asks me “what is the difference between Strategic Sourcing and Category Management?” you would expect me to roll off the perfect answer. However, in all honesty, as I began to provide my response I suddenly realised I wasn’t actually sure how accurate my response was!

As such, I set about to explore the topic with my network to establish that actually many of my subject matter expert procurement contacts provided me with a range of differing responses. No wonder I wasn’t quite sure!

For those reading this who are not familiar with the processes let me very briefly summarise. There are many differing definitions for both Category Management and Strategic Sourcing and most of them are extremely detailed and lengthy so describing these accurately in a paragraph is a difficult task. If I asked 50 people to define Category Management and Strategic Sourcing, I would most likely get 50 different answers.

In short though, Category Management is a strategic approach which organises procurement resources to focus on specific areas of spends. This enables category managers to focus their time and conduct in depth market analysis to fully leverage their procurement decisions on behalf of the whole organisation.

Strategic Sourcing on the other hand is the process of developing channels of supply at the lowest total cost, not just the lowest purchase price. It expands upon traditional purchasing activities to embrace all activities within the procurement cycle, from specification to receipt and payment of goods and services.

For me, Strategic Sourcing and Category Management are different terms for a very similar process. However, there are also dramatic differences between the two and their output. Category Management is the next level of maturity beyond Strategic Sourcing.

Procurement organisations across the world are increasingly turning to Category Management as a way of driving and delivering greater value and growth within their organisations. However, most companies struggle with the transition from Strategic Sourcing to Category Management.

Essentially structured Category Management should incorporate Strategic Sourcing processes which will therefore not only generate greater savings but also improve supplier performance, mitigate risks and drive innovations and improvements.

In an ever changing and improving strategic procurement market I would be keen to understand my networks thoughts on this topic?

By Adam Roughton – Principal Consultant – Procurement People