SAP: Three mistakes being made in category management

A new white paper from the German software giant is calling for procurement and supply chain teams to reprioritise category management, as it is moving from being an administrative function or sourcing process, to an opportunity to identify risks and find new competitive advantages.

What are the three mistakes made in procurement category management?

1. Viewing category management as administrative
2. Failing to prioritise digitisation
3. Not upskilling your talent 

A key warning listed by SAP is that optimisation of category management can take a long term effort, but can become a key value driver to the business over time.

The white paper is informed by research from an Economist Impact report of 430 C-suite executives. 

Viewing category management as administrative

SAP warns that category management can be undervalued by some organisations, and is viewed as an admin role within a procurement function.  By only trying to get best terms out of suppliers in a category, it can leave it disconnected from wider business goals.

The research listed category management 4th in a list of top areas to deliver increased value in the survey behind cost saving, risk reduction, and inventory management.

The paper suggests to help meet the pressure of today’s challenging and volatile environment, companies need to recognise sourcing and category management as two separate processes.

Failing to prioritise digitalisation in category management 

When the survey panel were asked for the main drivers for digital transformation in procurement in their organisation, category management was identified as the second highest priority after user experience.  

As well as helping companies meet the demands of modern supply chains and business, digital technology plays a significant role in advancing the value found in category management. 

This can include using data and analytics to assist with planning and streamlining internal collaboration.

Not upskilling category management talent

The panel in the report was asked what is needed to improve category management, and the highest priorities were increasing the use of digital technology, being able to spot risk and opportunities in categories, and being more focused on supplier relationships.  

The demands of a modern procurement operation require talent to have a wide range of skills, rather than administrative proficiency.   They also need to be able to spots risks and opportunities, develop relationships with suppliers and contribute to the wider business planning strategy.

What are the next steps to improve category management?

SAP suggest exploring the value of category management solutions, to drive your business towards solution driven recommendations, and improve spend management performance.  This can be coupled with spend analysis solutions to identify savings, spot risks and make sure you remain compliant.

Find out more about SAP’s category management solutions and how it can help a business stay competitive and resilient and the strategic benefits of supplier relationship management. 

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