There are a number of start-ups that are getting a lot of funding, but many of them do not have a proper sourcing team, even after growing to a decent size. Can category management be applied even to start-up companies? In addition, how prevalent is the procurement function in the famed Silicon Valley — would you like to take up this point first?
Yes, there is a technology company in Silicon Valley that dubbed the procurement department “the boneyard’ and sent employees there to await retirement. They viewed procurement solely as a transactional, clerical function with no added value. Typically, when there is supply constraint or profit pressure, executives do not pay attention to procurement. Many companies do not understand the value of procurement, because they have never seen it in practice.
Now, let us consider the case of start-ups. I developed a self-assessment instrument for procurement leaders as part of The Global Procurement Leaders’ Handbook. After reading the book and taking a self-assessment, one of the individuals moved from a large medical company to a cannabis start-up.
Later, he and I were talking about his assessment results, plans for his procurement function, and the company’s needs. We realized that “Capital Equipment” needed category management. The company is growing fast — the cannabis market demand is skyrocketing — and they cannot adequately source capital equipment; they need a strategy to address this issue.
For start-ups, whether it is a pharmaceutical startup or an IT start-up, again, what is the one category that, if you do not get right, will slow down your growth? That one category may need category management. Sometimes, it is going to be people. Therefore, your category could actually be something around HR; or it could be financing. There are some categories that will matter for the start-up depending on the market, but they do not need to worry about other categories until they rise to the surface.
Read more about The Global Category Manager’s Handbook