Our healthcare supply chain business has been throwing around a term called “category management” for a few years now that could be interpreted differently by individual supply chain managers. To clear up any misunderstanding about this relatively new supply chain term, I thought I would answer the most burning questions I’m hearing about this topic below:
- What is category management? It is essentially any group of similar items (i.e., pacemakers, stents, catheters, trays, procedure kits, etc.) which a healthcare organization is buying with the goal of maximizing savings through the artful, creative and scientific management of these cost drivers. There is no set formula for categorization; the supply chain department decides what will be in each category, such as, cardiac rhythm devices.
- Who should be designated a category manager? Most healthcare organizations designate a buyer or contract manager as a category manager for a purchasing category or categories. For example, a med/surg buyer could be designated the cardiac rhythm device, procedure kit and suture category manager. The key here is to have your category manager become your resident expert on these categories and all aspects of performance improvement (price, standardization, quality, benchmarking/KPIs and utilization). Supply chain directors can then reward them based on the overall performance of their categories.
- What if you don’t have enough staff for category management? – In some cases, at a smaller hospital, the supply chain manager with limited resources could designate his/her distributor sales representatives as category managers. Since smaller hospitals tend to buy more from their primary distributors, they then can take on more control of the category management functions for the smaller hospitals.
- Is category management all about price and standardization? Generally, category managers tend to focus on price and standardization as their #1 tactic for saving money that only represents 1% to 3% annual savings (annual savings/supply chain budget). Too often, category managers forget that if they more effectively manage the utilization in each category of purchase, they could save 7% to 15% more.
- Is category management a good idea or just a passing fad? I believe that category management is a great leap forward in supply chain management because it holds an individual accountable for the performance of a category of purchase. It’s my experience, that if someone isn’t answerable for a management function, then no one is responsible. In addition, these category managers will become experts in their categories which will make them even more valuable to your healthcare organization, and more fulfilled in their job.
I see category management as an emerging best practice within supply chain management because a hospital, systems or IDN’s product lines are becoming too broad, specialized and complicated for a generalist to master. In the age of specialization, it is now time to have your buyers become category managers of the products, services and technologies they are now buying. It only makes common sense to do this!