Category Management: Definition, Proven Tips, and Training

Category management is a key part of smart procurement. It means organizing your purchasing spend into groups, or “categories,” so companies can manage buying more strategically, save money, and build stronger relationships with suppliers.

If you want to cut costs and make your buying process more efficient, understanding category management is essential. According to Deloitte, companies that use category management well can lower procurement costs by 15 to 20 percent while also improving supplier performance and reducing risks.

With numbers like that, it is clear why category management is a focus for procurement teams around the world.

What Is Category Management?

Category management is about grouping similar products or services into categories like: IT equipment, office supplies, or shipping services, and managing each group with its own strategy. This way of working is different from traditional procurement, which usually focuses on individual buying events.

Imagine managing a store. Instead of thinking about every single product separately, you organize shelves into sections. Each section has its own sales plan, supplier deals, and stock levels. Category management is the same idea, but for buying goods and services in a business.

This approach helps procurement teams to:

Understand the market by studying suppliers and trends in each category.
Use buying power by combining spending in one category to get better deals.
Manage risks by spotting weaknesses in the supply chain for specific categories.
Work better together by aligning teams on category goals.

5 Important Steps in Category Management

To do category management well, follow these five key steps:

Category Definition: Look at your spending and group similar items or suppliers into categories.
Market Analysis: Study the suppliers, prices, market risks, and new trends for each category. For example, the technology category often changes fast and needs flexible plans.
Strategy Development: Create a plan for each category based on your company's needs, whether it is saving money, finding new ideas, or reducing risks.
Supplier Engagement: Build good relationships with your suppliers. Companies that work closely with their suppliers have 33% more success with new innovations.
Performance Measurement: Keep track of how each category is doing. Measure things like savings, supplier performance, and contract compliance, and adjust your plan as needed.

5 Tips to Get Better at Category Management

To really master category management, you need good habits and smart practices:

Use Data to Guide Decisions

Don’t guess when it comes to spending. Use data tools to find patterns and spot chances to save. For example, some companies find they spend too much in a category because different teams buy the same things separately.

Work Together Inside the Company

Category plans should not be created alone. Get finance, operations, and the people who use the products involved early. This helps make sure the plan fits the company’s needs and everyone supports new supplier choices.

Use Technology

Procurement software like e-sourcing and contract management systems makes category management easier. Gartner says companies that use these tools see 20% better contract compliance and faster buying processes.

Be Flexible and Update Often

Markets change all the time, so your category plans should too. Check your strategies regularly to handle supplier issues, rule changes, or new market ideas.

Get Training and Keep Learning

Category management is a skill that grows with learning. People who get certified, for example, with the Certified International Procurement Professional (CIPP) or Certified International Procurement Manager (CIPM), find better job opportunities.

Check Out: Procurement Category Management Training Course | 2-Day Online/Onsite

Why Do Many Companies Struggle with Category Management?

Even though most companies know category management is important, a McKinsey report in 2023 showed only about 30% actually use it well. Problems include bad data, poor teamwork across departments, and not enough training.

Because of these issues, companies lose chances to save money, get new ideas from suppliers, and avoid risks.

Training Programs That Help You Succeed

To do category management well, professionals should get proper training. Check out our CIPP and CIPM Procurement Certifications and take your career to the next level.

It offers complete and practical learning about category management, sourcing strategies, supplier relationships, and more.

These courses include expert teachers, real examples, and flexible schedules so you can confidently lead category management projects and get results.