The Determine


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March 31, 2016

Spend Category Management: What is it, and why is it so valuable?

Category Management is extremely valuable to organizations that conduct sourcing initiatives. This is especially true if they want to capture key knowledge around a specific sourcing category integrated within the corresponding organizational spend. This allows for ongoing category-specific measurements, such as rebate programs and Diversity Spend relative to specific items. It’s also essential for managing the overall status of the sourcing program to continually capture the intended cost savings.

Our Determine Strategic Sourcing solutions integrate Category Management and Spend Analysis together to provide organizations with deep spend visibility and analysis. With this approach, we provide ongoing and comprehensive “Spend Management.”

Spend Category Management requires three basic Spend Analysis-related capabilities:

  1. The ability to classify your spend data to company sourcing categories, with flexibility for ongoing changes and sourcing groups.
  2. The ability to isolate sourcing categories as separate knowledgebase unto themselves, incorporating additional supplier, item and market data.
  3. The ability to channel and refresh organizational spend data to specific sourcing categories on a regular basis. This will help drive ongoing measurements and Spend Management capabilities.

Spend data has typically been classified to UNSPSC codes and other classification schemes, but not specifically to organizational sourcing categories. Sometimes the data is rolled up into sourcing categories, but it can be difficult to maintain those correlations over time. This is made more difficult as sourcing categories evolve with an organization’s sourcing programs and initiatives.

The graphs below summarize how Spend Analysis directly supports Category Management, and the type of information that can be structured for ongoing measurements, dashboards, and management:

Determine Spend Management - Category Management - Spend Analysis Reporting

The key benefit of Category Management is that it ensures the expected savings are managed and realized over the longer haul. When building a Spend Management and Spend Analysis program, be sure to think through the taxonomies that will be needed to support this type of structure.

As your needs mature and you begin tracking specific spend by sourcing category, your organization will require Category Management capabilities integrated with Spend Analysis. Be ready.

Learn more about Category Management and how we can help you prepare for it. Contact us and request a demo today.