Businesses that have fast-moving consumer goods or FMCG and there are several SKU’s to compete within the brand, have vouched for the efficacy of category management procurement.
But the benefits can be used even by smaller establishments, should they know the difference between sourcing and category management. The simple act of grouping the products, and finding vendors who can supply the entire category, will result in tons of savings in terms of negotiable prices.
The whole crux of savings comes from the act of price adjustments and arbitrage opportunities that are missed when we are purchasing per product. For instance, a cosmetic company requires base products for its various formulations like skin creams, body lotions, lip balms, etc. Instead of buying beeswax, shea, coconut, avocado, and cocoa butter separately, they can save substantial amounts by grouping all their beauty-based items in one category. Since the order value is higher and hopefully regular, the supplier will be happy to offer a sizable discount.
Instead of treating each purchase in silos, when you group them, it unlocks hidden potential and also creates a perfect pitch of value discovery in the operational metric. Grouping into categories also helps in easier analysis to overcome supply chain constraints that are predictable with the data points. Here are some ways category management drives your business:
- Inventory Utilization
It is easier to see the customer’s purchasing patterns and stock up on products that move fast. If a product is not moving fast, then the business can decide to promote it more to increase its visibility to clear up the stock. This results in less dead or pileup of inventory. Products that have a low shelf life and are not moving fast can be avoided or reduced in the next refill so that extra time is not spent trying to sell the product to the customer.
- Good Products, Good Sales
The most selling product or service, needn’t be the best out there. It may be in the top spot because of a good marketing strategy. If the business believes in promoting locally produced, sustainable products that can’t afford high-end marketing strategies, then based on category management, they can devise simple visibility techniques that will give these products a fair share in creating their space.
- Enhance Consumer Experience
Category management looks into long-term solutions that are not limited to immediate savings alone. With the deeper consumer insights one has from category sales, the shopping experience of consumers is elevated. Using the data, a business can curate to the palate of the region and offer personalized selections with better quality and budget-friendly options as per their search and purchase history. For instance, if a regular shopper who picks routine groceries, is looking for a gourmet ingredient, then suggestions for other stuff that will make a complete meal are offered.
Conclusion: If a consumer is recommended gift solutions far before the festive season starts, then it sets a memory alarm in their minds to come back and shop. Category management platforms are more than simple process automation, they are magic wands.
