Chapter 6 Category Strategy Development
6.1 Introduction
Remaining competitive means that supply management must contribute to profitability by focusing
not only on cost savings but also on contributions to top-line growth and innovation.
Category: a specific family of products or services that are used in delivering value to the
end customer.
6.2 Aligning Supply Management and Enterprise Objectives
A company’s leadership team, in defining how the firm will compete and succeed in the global
environment, must clearly and succinctly ask these questions to their executive team:
- What markets will the firm compete in, and on what basis?
- What are the long-term and short-term business goals the company seeks to achieve?
- What are the budgetary and economic resource constraints, and how will these be allocated
to functional groups and business units?
6.2a Integrative Strategy Development
The strategy development process takes place on four levels:
1. Corporate Strategies: these strategies are concerned with the (1) definition of businesses in
which the corporation wishes to participate and (2) acquisition and allocation of resources to
these business units.
2. Business Unit Strategies: these strategies are concerned with the (1) scope or boundaries of
each business and the links with corporate strategy and (2) basis on which the business unit
will achieve and maintain a competitive advantage within an industry.
3. Supply Management Strategies: these strategies, which are part of a level of strategy
development called functional strategies, specifically how supply management will (1)
support the desired competitive business-level strategy and (2) complement other
functional strategies (such as marketing and operations).
1
, 4. Category/Sourcing Strategies: these strategies specify how a group tasked with developing
the strategy for the specific category being purchased will achieve goals that in turn will
support the supply management-, business unit-, and ultimately corporate-level strategies.
Integrative: the strategy is drafted by (or has significant input from) those people impacted
by the strategy, and for that reason, these individuals are often called stakeholders.
6.2b Engaging Stakeholders to Build Category Strategy Objectives
Need for Engaging Stakeholders
Category strategies, by definition, need to include stakeholders as part of the team. In general, the
more important the category, the more critical it is that internal stakeholders be involved.
A general guideline to follow is that category strategies derive their direction from business unit and
corporate-level objectives for success.
To enable an effective category strategy, the team must:
1. Allocate resources initially, including assessment of current spend, data collection, market
research, training, and people.
2. Validate the savings or contribution to other company objectives achieved by supply
management.
3. Sustain the initiative through presentations to senior executives who support the move
toward an integrated supply management function with other functional groups in the
supply chain, including marketing, research and development, and finance.
Unless supply management executives can effectively translate broad-level objectives into specific
supply management goals, these strategies will never be realized. Examples of corporate-wide
supply management goals associated with various supply management objectives:
- Cost-reduction objective:
o Be the low-cost producer within our industry. (Goal: reduce material costs by 15
percent in one year).
2
6.1 Introduction
Remaining competitive means that supply management must contribute to profitability by focusing
not only on cost savings but also on contributions to top-line growth and innovation.
Category: a specific family of products or services that are used in delivering value to the
end customer.
6.2 Aligning Supply Management and Enterprise Objectives
A company’s leadership team, in defining how the firm will compete and succeed in the global
environment, must clearly and succinctly ask these questions to their executive team:
- What markets will the firm compete in, and on what basis?
- What are the long-term and short-term business goals the company seeks to achieve?
- What are the budgetary and economic resource constraints, and how will these be allocated
to functional groups and business units?
6.2a Integrative Strategy Development
The strategy development process takes place on four levels:
1. Corporate Strategies: these strategies are concerned with the (1) definition of businesses in
which the corporation wishes to participate and (2) acquisition and allocation of resources to
these business units.
2. Business Unit Strategies: these strategies are concerned with the (1) scope or boundaries of
each business and the links with corporate strategy and (2) basis on which the business unit
will achieve and maintain a competitive advantage within an industry.
3. Supply Management Strategies: these strategies, which are part of a level of strategy
development called functional strategies, specifically how supply management will (1)
support the desired competitive business-level strategy and (2) complement other
functional strategies (such as marketing and operations).
1
, 4. Category/Sourcing Strategies: these strategies specify how a group tasked with developing
the strategy for the specific category being purchased will achieve goals that in turn will
support the supply management-, business unit-, and ultimately corporate-level strategies.
Integrative: the strategy is drafted by (or has significant input from) those people impacted
by the strategy, and for that reason, these individuals are often called stakeholders.
6.2b Engaging Stakeholders to Build Category Strategy Objectives
Need for Engaging Stakeholders
Category strategies, by definition, need to include stakeholders as part of the team. In general, the
more important the category, the more critical it is that internal stakeholders be involved.
A general guideline to follow is that category strategies derive their direction from business unit and
corporate-level objectives for success.
To enable an effective category strategy, the team must:
1. Allocate resources initially, including assessment of current spend, data collection, market
research, training, and people.
2. Validate the savings or contribution to other company objectives achieved by supply
management.
3. Sustain the initiative through presentations to senior executives who support the move
toward an integrated supply management function with other functional groups in the
supply chain, including marketing, research and development, and finance.
Unless supply management executives can effectively translate broad-level objectives into specific
supply management goals, these strategies will never be realized. Examples of corporate-wide
supply management goals associated with various supply management objectives:
- Cost-reduction objective:
o Be the low-cost producer within our industry. (Goal: reduce material costs by 15
percent in one year).
2
