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Product group management: definition & important aspects
Product group management in a nutshell:
Material group management is the systematic categorization and strategic management of procurement objects according to economic and logistical criteria. For purchasing, this enables more efficient supplier management, optimized procurement strategies and better negotiating positions thanks to bundled requirements.
Example: An automotive supplier reduces its number of suppliers from 140 to 85 strategic partners within 18 months by restructuring its 1,200 individual materials into 8 main product groups and 25 sub-groups, thereby achieving a cost saving of 12%.
Contents
Definition and importance of product group management
Product group management refers to the systematic classification and management of products and services that a company requires. The aim is to make procurement more efficient, reduce costs and ensure the quality of purchased goods. Similar or related items are grouped together, which provides a better overview and control.
Key aspects of product group management:
- Categorization: Identification and classification of goods into meaningful groups. This can be done according to various criteria, such as product type, intended use or supplier.
- Demand analysis: Determination of current and future demand within each product group. This includes analyzing historical data, market trends and future company requirements.
- Supplier management: selection and evaluation of suppliers for each product group. This includes supplier evaluation, negotiating conditions and building stable partnerships.
- Contract management: negotiating and managing contracts on a group basis. Standardized contracts for product groups can reduce administrative costs and increase negotiating power.
- Performance measurement: monitoring the performance and efficiency of the product groups. Key purchasing figures such as delivery reliability, cost development and quality standards are regularly reviewed.
Importance for purchasing:
Effective product group management not only enables buyers to reduce costs, but also to improve the quality of procurement and increase flexibility in dealing with suppliers. It also contributes to better planning and control of all purchasing activities, which ultimately strengthens the company's competitiveness.
Category management: From traditional procurement to category management
Building on the theoretical foundation of product group 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.
Old: Traditional procurement
Traditional approach: In traditional procurement, purchases are 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 product group management
Category management: Modern companies implement category management as an integral part of their purchasing strategy. By systematically categorizing goods and services, buyers can analyse 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.
Practical example: Implementation at an automobile manufacturer
A leading car manufacturer was able to achieve considerable efficiency gains by introducing product group management. By bundling the purchasing of electronic components across various models, the number of suppliers was reduced by 20% and purchasing costs in this product group were cut by 12%. In addition, closer cooperation with selected suppliers led to shorter development cycles and innovative product solutions, which strengthened the company's competitiveness in the long term.
Conclusion
Product group management is an indispensable tool for modern buyers who want to optimize their procurement processes and achieve sustainable competitive advantages. By systematically classifying goods and services into clearly defined groups, companies can not only reduce costs, but also increase the efficiency of their purchasing processes and minimize risks. With the right strategies, best practices and supporting technologies, buyers can realize the full potential of category management and make a significant contribution to the success of their company. Well-implemented category management also promotes transparency and collaboration within the company and with suppliers, leading to a stable and efficient supply chain in the long term. Investments in training and modern software solutions are just as important as continuous adaptation to changing market conditions. Overall, effective product group management makes a significant contribution to increasing competitiveness and achieving corporate goals.
