Category management is a model that optimizes the oversight and allocation of resources by organizing related products or resources into logical groups so they can be more effectively managed.
Product categories are typically organized around similar or related products, which may vary depending on the range of products categorized. A diversified company might have hardware and software product categories, for example, while a more specialized business software company might have categories for CRM (customer relationship), HRM (human resource management) and SRM (supplier relationship management) products. In this model, each category is managed as if it were a small business.
In procurement and purchasing, category management helps an organization retain a focus on the most important business categories, typically in terms of profits generated and/or resources used. Value-based categorization may be determined through ABC analysis or another tool.
Category management can also guide processes for strategic sourcing, an approach to supply chain management that helps an organization leverage its purchasing power to find the best possible values in the marketplace.