Strategic Sourcing vs. Category Management – Should You Give a Hoot?

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The short answer is YES!  And this from a firm that has long derided the latest buzz words from the consultant community and got harangued for recommending the death of Strategic Sourcing a few years back.  Every function must continue to evolve and the faster those evolution cycles, the better off that function is.  Just like Purchasing was known for the proverbial “3 bids and a cloud of dust”, so is Strategic Sourcing now becoming known for nothing more than seeking the lowest prices and destroying value along the way.  It is for that reason – survival – that we must take the opportunity being offered by Category Management (“CM”) and once again elevate the function and the value it provides.  Otherwise, we will again be relegated to the back offices like we were when it was called Purchasing.

If you’ve been following the discussion on this blog on this topic initiated by the co-founder (Anne Kohler), then you’ve noticed that both her and I have been all over this topic in the recent weeks and we have been hearing back from a large number of readers which is great.  And judging by the phenomenal response (well over  100 already) to our upcoming webinar series, the topic is hot!!  (BTW, if you haven’t registered, do so immediately as we are fast approaching our limit of participants!!).  That is  great news because it points to a recognition by the community that we must continue to find ways to add more value, we must continue to be more and more strategic, we must continue to evolve as a function and we must find ways to finally break free forever from looking for the lowest price and thus destroying value along the way.

While our webinar series will follow our Maturity Model which has been successfully tested and deployed over the last 15 years, there are two key messages that I think are important in this discussion.  The first is that for any successful Category Management initiative, the shift to a collaborative approach is critical.  Without that fundamental shift (or paradigm change – I still hate that term), the initiative is doomed for failure.  Adversarial or competitive behaviors or processes are a thing of the past and do not lend themselves at all to a successful evolution.  For example, this is not about shifting cost amongst the supply chain partners but rather eliminating cost.  And the shift to collaboration applies to both internal and external partners and it includes customer as well.  We find that the focus on collaboration with internal supply chain partners is often overlooked in many Category Management initiatives and it is often the kiss of death.

The second area of focus is one we have discussed many times and it’s the shift from cost to value.  This has been thrown around for a few years but it’s mostly lip service.  For a CM initiative to succeed, this is a fundamental shift (btw – it also drives collaboration).  We must recognize a few basic truths about value and let’s talk about just two of them.  First, Value can ONLY be defined by the recipient of that Value and NEVER the provider.  Many of us continue to insist on defining Value for the recipient and then wondering why they are not supportive of our efforts.  The second is that Value is many times NOT measurable and because of that, it doesn’t make it any less powerful in influencing the recipient’s decisions and behaviors.  In fact, the non-measurable components of Value are far more powerful in that regard and focusing only on measurable value or forcing ourselves to measure that kind of value is totally counterproductive.

BTW – our upcoming webinar series on Category Management is totally derived from the curriculum of our globally acclaimed Strategic Sourcing/Supply Chain “U” – and it’s free 🙂 !!!  Make sure you reserve your spot for the entire series now.

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Dalip Raheja
Dalip Raheja is President and CEO of The Mpower Group (TMG). Dalip has over 30 years of experience managing large organizations and change initiatives. He has worked across the spectrums of supply chain management, strategic sourcing, and management consulting.
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