Five Key Challenges of Intelligent Category Management and Direct Materials

Organizing the purchase of goods and services, including component parts and finished products, into categories can improve efficiency, cut costs, help identify risks and maximize innovation. But it can also feel like a gargantuan task.  Add to that the growing demand for insights on sustainability and forced labor risks, analyzing supplier performance across multiple ERPs, and keeping track of owed discounts, and it’s no wonder category managers wish for more hours in the day.

Nevertheless, the benefits of managing these tasks efficiently and intelligently are potentially game-changing, and artificial intelligence (AI) presents a powerful set of tools to get on top of it all. 

Here are five crucial areas of difficulty, and how AI can play an innovative role in helping handle them.

1 Lack of Visibility Across the Category Management Lifecycle

Category management isn’t the end in itself; the point is to make what you’re managing into something to sell to customers. And that requires cross-team visibility. Category managers require visibility in terms of spend, first and foremost, but also market intelligence, price volatility, and so on. Then, when an order is placed, they need to know whether orders are received on time, at the right quality and quantity, as well as whether the appropriate prices and discounts are being applied. The complexity is astonishing, and spreadsheets just don’t cut it, not least because it’s important to share all this information, in real time, with other divisions — production, marketing, accounts payable, and more. It’s critical to generate a collaborative environment where everyone has the same version of the truth. AI offers powerful, real-time tools to do so, because they categorize and aggregate spend, providing one source of truth that facilitates collaboration.

2 Absence of Real-Time Market Insights

Say the price of copper moves up 3%. You should be able to immediately have access to all the options available to mitigate the increased costs across a range of products, so that you retain quality and profit. Additionally, there’s a need for predictive analysis, based not just on past trends, but also on what’s going to happen next year, even if it’s a bit uncertain. Being able to monitor and incorporate multiple parameters and components allows you to better manage your position. Market insights are about much more than just real-time data. An AI tool from a third party, drawing from a huge range of sources, provides insights that are actionable, in order to drive value or solve problems. 

3 Inability to Create Optimized Category Strategies

Whether you’re strategizing for lower cost, low risk, sustainability or some other priority, you’re constantly juggling multiple cost drivers, while avoiding doing so at the cost of inhibiting the optimization of category strategies. With an advanced tool, you get additional perspectives beyond just that of the category manager, incorporating across-the-enterprise knowledge that could otherwise go uncaptured. With an AI tool, you also get perspectives from outside your company, with specific recommendations regarding category strategy, expressed in a very executable way, and based on best practices from across the industry. 

4 No Orchestration Capabilities to Execute and Track Category Strategy

A lack of ability to align and monitor category strategy execution across functional teams is perhaps one of the biggest challenges category managers face. Orchestration is the next step after harvesting market intelligence and developing a category strategy. Executing it is not just about rigidly adhering to whatever you put down in writing. You have to bring the organization together, looking beyond procurement and supply chain into finance, sales and product development. They should all come together to execute and enhance the strategy. This requires a backbone — a core platform — to give signals, feedback and transparency, so that orchestration can happen. Once you can see your own results, and how others in the organization are doing things, you can augment the insights with AI for decision-making that delivers the best outcome. 

5 No Intelligent, End-to-End Tool for Category Management

AI tools present a huge opportunity, but you need a solid platform in order to embed AI capabilities into your processes. You will almost certainly face the challenge of having multiple, disparate systems that need to be harmonized. Procurement intelligence is not just about AI feeding you updates on price and cost fluctuations, but how procurement organizations manage the whole process, working with other teams such as product development to stay abreast of best practices. Ideally, market intelligence, analytics and performance metrics are all incorporated into a fully integrated, source-to-pay platform. This will include risk management, product, market and supplier intelligence, and purchase price variations. All these together will help you identify opportunities to negotiate better terms or develop a new product, for example. Additionally, contract intelligence — providing a fine-grain view of exactly what is in each procurement contract — gives a well-rounded view of ongoing costs to the category manager, the procurement manager and the company as a whole in order to drive better margins. 

Another benefit is that an AI-powered, end-to-end orchestration platform increases the chance of finding and retaining good workers who are driven to produce results. All workers want to be able to orchestrate the strategy cleanly, monitor the results, and communicate all of this so they show they’re bringing value to the company. But younger workers may be more motivated to do so with the help of cutting-edge technology.

GEP Puts it All Together

GEP provides an AI-enabled platform for procurement and supply chain managers that seamlessly integrates strategy, software and managed services. GEP is the only vendor bringing together all three elements critical to achieving better category and procurement management in an end-to-end system — incorporating business intelligence, strategy creation, orchestration and a platform to manage and monitor all of it, across the enterprise. 

As a result, GEP empowers hundreds of Fortune 500 and Global 2000 enterprises across industries and markets worldwide. Organizations may employ many individual solutions, but managing them as a whole can be challenging, and often their capabilities get left on the shelf. An end-to-end solution means companies can rapidly establish the infrastructure and capabilities necessary to build and run high-performing procurement teams and supply chains that transform how you do business.

Resource Link: https://www.gep.com/