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Product group management: definition & important aspects
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What is product group management?
Material group management describes the systematic categorization and strategic management of procurement objects according to economic and logistical criteria. This structured approach enables companies to manage their procurement activities efficiently and achieve sustainable cost savings. This creates strategic competitive advantages and lays the foundation for professional procurement management.
Contents
Product group management in the electronics industry
Category management plays a key role in the electronics industry, as complex supply chains with thousands of individual components have to be coordinated. The management of semiconductors, circuit boards, connectors and other electronic components in particular requires precise category management in order to ensure security of supply and optimize costs. The high speed of innovation in the industry and short product life cycles require dynamic category management that can react quickly to technological changes and new market requirements. Systematic categorization also enables a better negotiating position with specialist suppliers and supports the strategic planning of make-or-buy decisions. Effective product group management also helps to minimize risk in the electronics industry by reducing dependence on individual suppliers and identifying alternative procurement sources for critical components.
Product group management in the automotive industry
Product group management is of particular strategic importance in the automotive industry, as an exceptionally high level of complexity of components and supplier relationships has to be managed here. The systematic categorization of components such as powertrain, electronics, interior and body parts enables efficient control of the often multi-stage supply chains and creates the basis for targeted cost optimization. The increasing electrification and digitalization of vehicles requires dynamic product group management that takes both classic mechanical components and new fields of technology into account. By bundling requirements across different vehicle models, economies of scale can be achieved and the negotiating position with suppliers can be strengthened. Professional category management also supports the early integration of suppliers into development processes and thus promotes innovation, as shown by the practical example of a car manufacturer that was able to reduce the number of suppliers by 20% and at the same time shorten development cycles by restructuring its product groups.
Product group management in the mechanical engineering industry
Product group management plays a central role in the mechanical engineering industry, as a balance must be struck between standardized components and customer-specific custom-made products. The systematic categorization of standard parts, drive components, control technology and special parts enables efficient control of procurement processes and creates the basis for an optimal balance between standardization and flexibility. The high degree of individualization in the mechanical engineering industry requires a product group management system that enables both the cost-effective procurement of standard components and the flexible integration of special suppliers. By strategically bundling recurring requirements, cost advantages can be achieved despite the often small batch sizes. Professional category management also supports the development of long-term supplier relationships, which are particularly important for technically sophisticated components and custom-made products and help to ensure competitiveness.
Category management: From traditional procurement to category management
Companies are increasingly recognizing the need to strategically align their purchasing processes. In practice, it is essential to transform procurement from a purely operational activity to a strategic function. This not only enables cost savings, but also a stronger market position and long-term supplier relationships. The evolution from traditional purchasing practices to structured product group management is a decisive step in this process.
Traditional approach: Traditional procurement
In traditional procurement, purchasing is often decentralized and carried out without an overarching strategy. Departments order independently of each other, which leads to a fragmentation of purchasing processes. Tools such as simple order forms or spreadsheets are used. However, this approach has considerable disadvantages: There is a lack of transparency across the entire purchasing volume, potential for volume discounts remains untapped and the negotiating position with suppliers is weak. In addition, redundant processes and a lack of standardization result in increased administrative costs and inefficiencies.
New: Strategic category management
Modern companies implement product group management as an integral part of their purchasing strategy. By systematically categorizing goods and services, buyers can analyze and bundle the entire procurement volume. Innovative software solutions enable a detailed spend analysis in which expenditure is broken down by product groups, suppliers and business units. This leads to improved negotiating positions, as larger volumes can be consolidated and strategically tendered. Practical benefits include cost savings of up to 15%, shortened procurement cycles through standardized processes and greater collaboration with key suppliers to promote innovation.
Conclusion
Material group management has established itself as an indispensable strategic tool in modern purchasing and makes a significant contribution to increasing the competitiveness of companies. The systematic categorization and management of procurement objects not only enables significant cost savings to be achieved, but also promotes innovation and minimizes risks. Particularly in technology-intensive sectors such as the automotive, electronics and mechanical engineering industries, professional category management enables the efficient management of complex supply chains and the development of strategic supplier relationships. The consistent implementation and further development of category management is therefore a decisive success factor for companies that want to make their procurement fit for the future.
