Category Management Consumer Products 

Purpose

Category Management Consumer Products is a process involving both manufacturers and retailers, in which categories are managed as strategic business units to improve profits by increasing customer satisfaction. Manufacturers and retailers work closely together to develop, implement and control the category business plan.

SAP provides an integrated IT environment as well as conceptional support.

Prerequisites

Although manufacturers and retailers act as separate organizations and have different roles and areas of competence in the Category Management process, the process is very similar for both collaboration partners.  Cooperation is difficult without a standardized process. The process serves as a guideline for joint action and allows the partners to use their core competencies to each other’s advantage. Manufacturers and retailers must work closely together on a mutual trust basis.  This type of cooperation is particularly important for the mutual exchange of data and information.

The scope of exchanged data and information and the weighting of the roles of each business partner within the process depends on the intensity of the cooperation.

Process Flow

The Category Management process usually works as follows:

After prior consultation with the retailer, the consumer products manufacturer starts the Category Management project. The consumer products manufacturer is the owner of the Category Management process.  The retailer takes part in the process.

Consumer products manufacturer and retailer define the category together by determining which products should be included in a category.  The consumer products manufacturer determines the structure of the category by creating a customer decision tree (CDT) containing the previously selected products.

The retailer then defines the role of the category. The role determines the priority and meaning of a category in the total business of the manufacturer and the resources assigned to the category.  These assignments are important prerequisites and determine strategic, tactical, and operative objectives.  They are also the basis for differentiating from the competition, and for distributing the resources to the strategic enterprise units, for example, a category.

The consumer products manufacturer then makes a valuation of the categories.  To do this, information must be collected, processed, and analyzed.  In this way, the current performance of a category can be assessed, and the areas within the category that offer the greatest potential for increasing sales, profit, and overall capital profitability can be determined.

The current performance of the category is valuated with reference to the role assigned to it, and includes the consumer products manufacturer’s own assessments as well as consumer, market, and retailer valuations.  The potentials that are determined form the basis for the next steps in the planning process.

Consumer product manufacturers and retailers confer to formulate the interim objectives they want to achieve by implementing the joint business plan.  The objectives must correspond to the role of the category.  The objectives for a profilation category can be primarily to increase sales and market share, for example, whereas the objectives for an enhancement category can be profitability-related.

The manufacturers and retailers then develop strategies to exploit existing potentials by making creative and efficient use of the resources available for the category.

The consumer products manufacturers and retailers then work out specific measures for implementing the strategies that have been developed and validate these measures.  They decide on the tactical options, examine the possible repercussions of different tactical measures in comprehensive analyses, and make a final decision as to which tactics are most suitable for implementing the strategies

Once they have decided on the tactics, a specific implementation plan is developed that determines the deadlines and responsibilities for the various tactical measures.  The benefit of Category Management comes to light particularly through the practical implementation of the business plans of the categories.

The monitoring and valuation of whether the plan has been fulfilled is a continuous process and is carried out on the basis of the performance objectives set.

Example

The following table shows a possible constellation for the Category Management scenario:

 

 

Manufacturer	Retailer	Concrete scenario description
SAP BW 3.10 SAP SEM 3.20 SAP Enterprise Portal 5.0 Other software components (for example, space management software)	SAP Enterprise Portals	Category Management Consumer Products: Concrete Constellation