Category Management and Supplier Evaluation/Selection

Category management is the process of developing external industry intelligence and analysis, internal demand, supply base capabilities and operational risks, and a strategy to approach that marketplace with our needs to match it with what suppliers can offer. Sourcing events are a specific activity contained within the strategy used to explore the market to identify competitive value. A critical element in the strategy is a business case that identifies the rationale for the plan, a risk mitigation plan, and the business value derived from the strategy. The output of a category strategy is a plan for negotiating a contract, a supplier scorecard used to monitor the relationship, as well as a sourcing workplan developed for communication of the strategy to the internal user.

In many cases, category management requires having senior executives acknowledge that, ultimately, purchasing has the strategic responsibility to evaluate and select suppliers. It is important to retain this right to avoid maverick buying and selling—a situation that occurs when sellers contact and attempt to sell directly to end users (purchasing’s internal customers). Instead, purchasing should work with stakeholders and include them on the category team, to ensure that they have input into category strategies to evaluate and select suppliers in coordination with stakeholders. Engineering, for example, can support the category team by evaluating supplier product and process performance capabilities. The right to evaluate and select suppliers also does not mean that sales representatives are not allowed to talk with nonpurchasing personnel. However, nonpurchasing personnel cannot make commitments to the seller or enter into contractual agreements without some formal interaction with purchasing, either through a category team or through contract negotiation. The selection decision in category teams requires that the members reach a consensus in selecting suppliers.