Category management
Managing purchases by grouping similar spend into categories, such as IT, logistics or facilities, each with its own sourcing strategy and owner.
In short
- It replaces buying item by item with a plan for each group of related spend.
- Each category has an owner who knows its market, suppliers and risks.
- The Kraljic matrix is a common tool for deciding how to treat each category.
Category management organizes procurement around groups of related goods and services rather than individual purchases or departments. Instead of each team buying its own laptops, software and printers, IT hardware becomes one category, managed by someone who understands that market and negotiates for the whole business.
How it works
- Define categories: group spend by what it is, using spend analysis to see where money actually goes.
- Analyze each one: total spend, number of suppliers, market conditions, risks and internal needs.
- Set a strategy: consolidate suppliers, renegotiate, change specifications, or build a closer partnership.
- Implement and review: run sourcing events, sign contracts, then track savings, compliance and supplier performance.
The Kraljic matrix
A widely used tool plots categories by two questions: how much does this spend affect profit, and how risky is the supply market? The answers put each category in one of four boxes:
- Strategic: high impact, high risk. Build long-term supplier partnerships.
- Leverage: high impact, low risk. Use competition to get better prices.
- Bottleneck: low impact, high risk. Secure supply, hold safety stock, find alternatives.
- Routine: low impact, low risk. Simplify buying, use catalogs or cards.
Worked example
Creating an IT hardware category
A 400-person company finds laptops being bought from 11 suppliers at prices varying by 30% for the same model. It creates an IT hardware category owned by the IT procurement lead, runs a tender, picks two suppliers with a standard catalog, and cuts the average laptop price by 14% while reducing the models supported from 23 to 4.