Category Management - Modified Category Management

Modified Category Management

For MRP-based manufacturing industries, the predominant cost-saving methodology in category management (CM) involves the integration of market intelligence with leveraged spending (for a given category of product or service). In industries where asset operation and preservation bear more significance to the procurement process than do product manufacturing – such as in an MRO environment – demonstrable benefit can still be achieved with category management but is best approached with some manner of adjustment to CM’s usual processes for analysis and strategy development. The first challenge becomes incorporating analytical processes and value drivers that are largely indigenous to the MRP world in a manner that makes sense to an MRO environment. The second (and no less important) challenge becomes avoiding a trap where the CM processes are perceived to be more important than their outcome – a scenario that can result in significant analytical delay, and even complete process paralysis. An excellent example of an MRO environment warranting adjustment to classical category management is nuclear power generation in the United States, where the adjusted approach to category management has been coined "MCM" – standing for MRO-based Category Management or Modified Category Management. Not only does electricity generation epitomize an MRO-driven environment, the nuclear energy source adds numerous dimensions of supply and procurement complexity – including federal and state regulatory compliance, nuclear industry standards compliance, nuclear-unique system and component design, and a tightly-audited (and very small) supply base, amongst others. Due to the nature and quantity of discrete characteristics native to nuclear power generation, it can easily be argued that nuclear power generation, in and of itself, should be a distinct category of procurement within a category management project. The fundamental adjustment made between the classical category management approach and the nuclear MCM approach is a shift from procurement strategies focused on leveraged spending to procurement strategies embracing nuclear value drivers, technology innovation, risk management, and strategic sourcing.