Deconstructing the New Category Management Offering From SAP

Category management is the process of controlling the acquisition of products and services by classifying them according to their common traits. In order to get the maximum value out of every purchase, this approach assists companies in identifying, analyzing, and managing the total cost of ownership for each category. Additionally, it aids in cost savings, supplier relationship enhancement, risk management improvement, and procurement process streamlining. Despite being a conventional procurement strategy, category management has gained renewed popularity in the recent past due to global instabilities and concerns.

• What is the SAP Category Management solution?

The newest product from SAP, the SAP Category Management solution, digitalizes and automates the creation, implementation, and oversight of category strategy. The solution, which is based on the SAP Business Technology Platform, offers category analytics, process assistance, analytical frameworks, and system-enabled suggestions that aid procurement organizations in quickly advancing toward intelligence-driven category management and enhanced spend management performance. Through this solution, category managers can quickly and efficiently:

Define category profiles using a consolidated category taxonomy for purchasing that offers a consistent, corporate-wide classification scheme.

Outline and plan a strategy utilizing step-by-step instructions on how to carry out category positioning, assess categories using frameworks used by the industry, and spot opportunities.

Monitor and execute outcomes by having the capacity to automatically transform category management initiatives into sourcing projects or events and link category management with source-to-pay systems.

• What unique advantages does SAP Category Management offer?

SAP Category Management is natively integrated to SAP Ariba Sourcing, SAP Ariba Contracts, SAP Ariba Spend Analysis, and other procurement solutions. It delivers a seamless user experience across source-to-pay processes without requiring expensive and time-consuming point-to-point integrations. Integration with SAP Ariba Sourcing allows easy leveraging of out of the box capabilities to develop sourcing strategy.

Additionally, SAP Category Management is linked to SAP Analytics Cloud solution, allowing to monitor and examine category spend information through the SAP Analytics Cloud user interface. A shared data layer serves as the framework for thorough analytics, insights, and opportunity analysis in SAP Category Management. Organizations can set and meet spend management goals with the help of category profiling capabilities, guided strategy frameworks, system-recommended opportunities, integrated execution, and metrics tracking.

SAP Category Management provides an intelligent opportunity analyzer to automatically recommend opportunities for categories based on spend data available for them and on various opportunity types configured in the solution. Category managers can either accept or dismiss these recommended opportunities. Future integrations with large language models (e.g. ChatGPT) are planned for guidance on category strategy creation.

• Integration with SAP Ariba Sourcing?

Category managers can develop a guided sourcing project from an initiative in SAP Category Management because the guided sourcing functionality in SAP Ariba Sourcing is natively connected with SAP Category Management. To execute sourcing projects, they can also transition from SAP Category Management to the guided sourcing user interface; the task progress of the guided sourcing project is visible from the SAP Category Management initiative screen. Additionally, active projects can be seen on the active projects screen and in the planning calendar on the workbench.

• Product classifications to which purchasing categories can be mapped?

1. Ariba Classification Taxonomy – Used for SAP Ariba Spend Analysis.
2. Material groups – Used for SAP solutions.
3. United Nations Standard Products and Services Code (UNSPSC) – Used for SAP Ariba solution integration.
4. Custom domains – Used for market intelligence data provider integration codes.

• Which category strategy development frameworks does the solution supports?

1.  Category segmentation using the Kraljic Matrix.
2. Strengths, weaknesses, opportunities, and threats (SWOT) analysis.
3. Capture of business requirements for the assigned categories using the regulatory, assurance of supply, quality, service, cost, and innovation (RAQSCI) model.
4. Porter’s Five Forces Framework to identify and analyze the supply market dynamics for the category.
5. Risk assessment card to display prioritized risks identified in the procurement activities for a category.
6. Cost structure card to provide insights into the cost components, cost distribution, and cost drivers associated with the purchasing category.

• Solution Availability?

The offering is currently live for SAP customers hosted in EU data centers. For US data center, the solution is expected to be available in Q3 2023.

• Data Sources and Pre-requisites?

During the initial solution release, data from the SAP Ariba Spend Analysis solution will exclusively feed into the solution. So, companies will need to have a license for SAP Ariba Spend Analysis. In later releases, organizations will have the option to bring data from other sources. Important to keep in mind that that this solution is natively integrated with SAP Ariba Guided Sourcing, and not with the classic sourcing. So, moving to the Guided Sourcing option is recommended.

• Resources available to help access category intelligence information?

SAP has partnered with Beroe, the foremost provider of procurement intelligence and analytics, to offer access to a host of data feeds supporting market information.

While SAP Category Management will provide the technical framework for building and executing the category strategy, SAP recommends that customers evaluate and select one of the following three packages from Beroe to access market intelligence in the context of each organization's category strategy:

1. Beroe Market Intelligence Basic: This includes access to various data sources, cost structure modelling, and category news.
2. Beroe Market Intelligence Advanced: This package includes the topics in the Basic package plus access to the Beroe Data Hub platform with price, forecast, cost structure, and benchmark information spanning over 832 distinct data elements per category and 7.4 million discrete data elements.
3. Beroe Enterprise: This package includes the topics in the Advanced package plus access to the proprietary Beroe LiveAI tool. Features in this tool include market information discovery, category performance, price tracking, supply chain visibility, supplier ESG information, monitoring and forecasting of real-time price changes across products, and chatbot based querying to retrieve relevant information.

Purchasing a Beroe Connector license, available on the SAP Store is a pre-requisite. Customers are expected to configure the Beroe endpoints, and Beroe will provide provisioning support.