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Joe is a Category Manager at an automobile company. Which of the following would be the best way to decide on categories in this industry?
In the automobile industry, the most logical method for structuring categories is by part. Large manufacturing organisations, such as Ford or Toyota, procure thousands of parts and materials from hundreds of suppliers. To manage this complexity effectively, they segment procurement responsibilities into categories such as engines, tyres, glass, electronics, or body frames. This allows Category Managers to develop deep expertise in their assigned areas, improving supplier relationships and value delivery.
Other approaches are less effective:
Alphabetical categorisation is impractical and arbitrary, providing no strategic value.
By spend creates imbalances, as high-value categories would attract disproportionate workload and risk, leaving others underrepresented.
By supplier could lead to inefficiency and over-fragmentation, as suppliers often provide multiple types of products.
The study guide stresses that categorisation must allow procurement teams to be efficient, balanced, and capable of strategic focus. By organising categories by part, managers can align more closely with engineering and production needs, ensuring better cross-functional collaboration.
[Ref: CIPS L5M6 Study Guide, p.3 -- Defining categories in Category Management]