Addressing the future challenges for Category Management

The 2024 Global Category Management Report is an assessment of the current state of Category Management in Procurement. But instead of just comparing the current state to the past, it also aims to anticipate future challenges and priorities. Therefore, we included a question asking participants to identify their greatest challenge for category management in the future. This article summarizes the findings.

Stakeholder engagement, alignment, and understanding remain the central challenge for category managers.

31% of participants identified the primary challenge to succeeding with Category Management as how stakeholders get involved in the development of category strategies. This includes how to create better alignment with stakeholder priorities, develop their understanding of category management as a business approach, and build engagement during the strategy development process.

While freeing up time in stakeholders’ schedules and creating a better understanding and appreciation of the importance of Category Management is important and noble, ensuring that category managers make effective use of the available time is vital for the success of Procurement. Equipping them with the necessary soft skills for effective stakeholder engagement, communication, and storytelling is crucial for unlocking business requirements and crafting convincing narratives for their strategies. The Category Management toolkit should include tools that facilitate stakeholder identification, mapping, and communication management to ensure consistent application.

Resource availability and skills undermine the best intentions

For 17% of participants, the necessary skills to drive effective category management are a significant issue. Additionally, 5% of participants confirmed that their category managers did not always have the time and space to apply their skills appropriately within a category environment.

It takes significant effort and time, including appropriate training and coaching, to develop the skills necessary for applying category management effectively. With increasing challenges finding and retaining talent, this investment might not be sustainable, especially as knowledge often remains in individuals’ heads or desktops. Investing in capabilities that support knowledge management is, therefore, an important step for securing this investment.

Risk and macroeconomic factors are an evergreen challenge

9.5% of participants identified the pressures exerted by increased supply chain risk and macroeconomic factors, such as inflation, supply shortages, and workforce disruption, as important challenges that need to be addressed through Category Management. This speaks to the diversion of resources into combatting not just short-term but also more structural issues within broader economies.

To ensure that risk analysis is not limited to isolated status assessments as part of category strategies, supplier and supply chain risks must be associated with clear risk mitigation strategies. A centralised initiative management capability can help create a holistic view of potential risks and ensure that risk mitigation activities can be tracked.

Limited category management process leads to limited results

Notably, 6.5% of participants cited a lack of or a limited category management process as their greatest challenge. This may indicate a lack of genuine understanding of category management and what it takes to make it work successfully.

Our experience suggests that a proper operating model is often lacking, with limited support for category managers and limited leadership and governance. Designing an operating model that puts category management at the centre and aligns its different dimensions will ensure an end-to-end process with clear processes, tools, and roles and responsibilities, unlocking the value of Category Management.

No culture for category management means a cultural change is needed

A similar-sized group of 6.5% of participants noted that their organisation was not well-positioned to adopt a strategic category management approach to acquiring goods and services. This was caused by a lack of understanding of how it might work, too much focus on other areas of procurement, and a lack of senior management understanding of how category management could add value.

To understand this challenge, we must fully analyse the expectations, current practices, and opportunities offered by Category Management. A maturity assessment will allow us to identify the reasons, potential opportunities, and a clear roadmap towards the desired end state.

Data, technology, automation, and AI – a cry for help

The advent of AI is transforming the overall business landscape, and many respondents mention a lack of digital tools, data availability and quality, process automation, and the use of AI as both a potential opportunity and a challenge for their success in category management.

Investing in technology to support spending and data analytics, market intelligence, category strategy development, initiative management, and sourcing execution is a significant demand for any organization. It is crucial to identify the most pressing challenges and pinpoint capabilities that can address multiple pain points while seamlessly integrating into the broader technology ecosystem to build a compelling case for technology investments.

What’s next: influencing the future of Category Management

Each of these challenges can be addressed through a range of interventions, ranging from targeted and ambulant approaches to broad and intrusive ones. Regardless, success and sustainability are more likely when a well-thought-out category management improvement plan is in place, outlining the necessary steps toward achieving category management excellence.

With over 20 years of experience in Category Management and more than 100 client engagements, we have acquired extensive expertise in this field. We are confident that our work on operating model design, our proprietary toolkit, and transformation support can help you establish a solid foundation in Category Management and address future challenges. Please reach out to discuss our maturity assessment and how we customise our approach to meet your unique requirements.

Further reading:

Blog: How to accelerate your Category Management adoption