Category Management – Definition, Planning & Strategy

Category management is a procurement strategy that involves grouping similar products or services into distinct categories to streamline purchasing, enhance supplier relationships, and drive cost savings. By treating each category as a standalone business unit, organizations can make more informed decisions based on market trends, supplier capabilities, and business needs.

This method enables procurement teams to develop category-specific strategies that improve efficiency, mitigate risks, and ensure better value across supply chains.

The category management process consists of several critical steps that help organizations structure their procurement effectively:

1. Category Definition: Identifying and grouping related products or services into categories.
2. Market Analysis: Researching supply markets, pricing trends, and key suppliers.
3. Strategy Development: Establishing procurement goals, cost-saving initiatives, and risk mitigation plans.
4. Supplier Engagement: Negotiating contracts, forming strategic partnerships, and enhancing supplier performance.
5. Implementation: Executing procurement strategies through data-driven decision-making.
6. Performance Monitoring: Continuously evaluating supplier performance and category efficiency to optimize future procurement.

Category management in procurement is broadly divided into two main types:

1. Direct Procurement Categories

Direct procurement refers to goods and services that are essential for production and directly impact the final product. Examples include:

• Raw materials
• Manufacturing components
• Equipment and machinery

2. Indirect Procurement Categories

Indirect procurement covers goods and services that support business operations but do not directly contribute to production. Examples include:

• Office supplies
• IT services
• Marketing and advertising

Keelvar’s AI-driven sourcing solutions optimize category management by streamlining procurement decisions and supplier engagement. With automated sourcing, real-time analytics, and intelligent bidding strategies, Keelvar empowers businesses to:

• Enhance decision-making with data-driven insights
• Reduce costs through optimized supplier negotiations
• Improve efficiency with automated category management workflows