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How Does Category Management Help Reduce Procurement Costs?

April 19, 2024

Procurement - How Does Category Management Help Reduce Procurement Costs?

Sorting and organizing make daily routines easy for everyone. Instead of piling on clothes, when we arrange our wardrobe, we don’t get late because of missing socks or a favorite tee. Similarly, in a business place, sales are affected drastically by category management procurement. Things can go haywire if there is no proper and easy way of sorting, and categorizing the stuff that one sells. It will be difficult to search for the consumer through a haphazardly spread online website or store that does not give importance to the naming, tagging, and positioning of the goods.

In the past, smaller businesses might have managed okay without an automated service that looks into category and inventory management. But today's businesses are like huge supermarkets. Category management is like organizing those supermarkets, putting things in aisles that make sense together. It helps them find things faster, negotiate better deals with suppliers, save money, and serve customers better. That's why it's become a bigger deal now.

Procurement is a function that helps run the supply chain of any organization. Researching markets and finding genuine suppliers who fulfill orders on time and give good pricing and discounts is the first step of procurement. However, it goes beyond as the purchase manager is usually contacted to maintain a networking relationship or to get their dues cleared from the accounts payable section. Category management supports procurement by reducing procurement costs in the following five ways:

Bulk discounts

The cost of manufacturing reduces with bandwidth as the fixed costs remain the same and are easily absorbed across big-ticket purchases. The bigger the order, often the cheaper the price per item. Category management groups similar things, so businesses can negotiate bigger discounts by buying in bulk.

Supplier negotiation

Instead of dealing with many suppliers for different things, category management helps identify a few key suppliers for each category like office supplies or furniture.

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This gives the business more leverage to negotiate better deals with those suppliers. So instead of buying paper from one vendor and pens from another, one ends up buying all the office supplies from the same supplier at a decent price.

Standardization

Many businesses might buy different types of staplers or printer paper. Category management helps choose a standard set of products within a category. This reduces waste and simplifies ordering, saving time and money.

Better spend tracking

By grouping similar things, it's easier to track how much is spent on each category. This helps identify areas where spending can be reduced and higher discounts negotiated in case the spending is more per supplier.

Improved efficiency

Less time is wasted searching for things or dealing with many suppliers. The time required to deal with one or fewer suppliers can be used for other tasks like maintaining vendor relationships.

Conclusion

Searching for needles in haystacks will not help you be an early bird that gets the worm. So, if you haven’t been drying your grass when the sun shines, then it's about time to stitch your process to save nine gaping holes.  So get going with a managed service for your category management needs.


NCFA Jan 2018 resize - How Does Category Management Help Reduce Procurement Costs?The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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