akirolabs: the Evolution of Procurement Category Management
akirolabs believes that scenario modelling better equips procurement to break free from its ivory tower, move beyond outdated supply power frameworks, and think broadly in line with what the business wants.
The increased complexity of supply chains and emphasis on sustainability, innovation and risk management render old models, like the Kraljic Matrix and power game-based approaches, insufficient. As the procurement landscape evolves, a more holistic and integrated approach is demanded.
This transformation is outlined in the company’s eBook 'Category Management is DEAD: What Comes Next?'
According to akirolabs, the introduction of Strategic Business Scenario Modelling (SBSM) lies at the heart of this shift. Developing a forward-thinking methodology allows procurement teams to anticipate future market conditions and align strategies with overarching business goals.
This involves considering multiple dimensions such as costs, sustainability and resilience to provide a comprehensive framework for decision-making that extends beyond cost savings.
The model will help procurement teams in understanding various business scenarios and aids them in deciding which value levers to trigger, potentially unlocking up to 4.4x higher business value. When complemented with marketing intelligence tools, it also enables the anticipation of future market conditions and the creation of procurement strategies that are future-ready.
Category management at a critical point
Once hailed as revolutionary for streamlining procurement and maximising value, category management now faces challenges.
Technological advancements and the increasing complexity of global supply chains have shifted business priorities, making traditional practices less effective. akirolabs argues that transformation is now more urgent than ever.
Strategic Procurement has traditionally segmented spend into categories to achieve cost savings and efficiency.
However, this administrative approach no longer meets the demands of modern procurement. Organisations must navigate a landscape marked by volatility, uncertainty and complexity where risk management, sustainability and innovation take precedence.
As procurement professionals tackle these challenges, it becomes evident that a new, strategic, integrated perspective is needed.
The rise and fall of category management
In 1983, amidst technological advancements including the introduction of the first mobile phone, Peter Kraljic conceptualised the Kraljic/Supply Power Matrix, spotlighted in the Harvard Business Review.
Categorising spend based on supply market complexity and purchasing importance, this matrix became a foundational framework in strategic purchasing and commodity group management, maintaining relevance over four decades.
Over 40 years since its adoption, akirolabs critically examines its role today, questioning why concepts from 1983 continue to significantly influence purchasing decisions.
Category management treats each category as a mini-business with its own strategies and objectives. Originally emerging in the 1980s to meet the need for structured, strategic procurement practices, it aimed to optimise spending and manage supplier relationships effectively.
Initially successful for streamlining processes, cutting costs and enhancing supplier relationships, its limitations became apparent as the business environment evolved. With the world constantly changing, key factors contribute to its decline and push for reinvention:
- Increased complexity of supply chains: Globalisation has expanded supply chains, making them more interconnected and complex. Traditional category management often fails to address broader systemic issues in global supply networks, necessitating a more integrated approach.
- Shifting business priorities: Modern businesses prioritise sustainability, innovation, risk management and supplier diversity alongside cost savings. Traditional category management’s narrow focus on cost efficiency does not align well with these broader business goals, limiting its strategic value.
- Technological advancements: The digital revolution has reshaped operations, introducing technologies like AI, machine learning and advanced analytics for efficient procurement management. Traditional category management, relying on manual strategies and presentations, lags behind in digital transformation benefits.
- Changing regulatory landscape: Stringent regulations around sustainability, labour practices and supply chain transparency demand comprehensive oversight. Traditional processes struggle with the dynamism of modern regulatory requirements.
- Outdated frameworks: The Kraljic Matrix and Procurement Chessboard, despite their structured approach, offer limited views across vertical business units. This restricts procurement within its traditional boundaries.
Journey towards next gen category management
akirolabs proposes Strategic Scenario Modelling as a methodology aligning procurement strategies with business objectives. Simulating future scenarios anticipates market conditions, supply chain disruptions and evolving business needs, creating robust, flexible strategies.
This allows organisations to visualise impacts on overall business goals, vital in today’s complex procurement landscape.
Modern procurement faces challenges previous models overlooked, resulting in suboptimal decisions. Events like the COVID-19 pandemic highlight the need for flexible approaches traditional models cannot provide. Procurement strategies must align closely with broader business goals to support competitive advantage and business resilience.
How scenario modelling works
Procurement teams compare strategies across dimensions such as cost savings, sustainability, resilience and innovation through scenario modelling. Simulating scenarios assesses trade-offs, ensuring decisions align with broader business objectives.
Examples of scenario modelling include:
- Software Procurement: IT operations prefer suites from large providers for efficiency and security, while end-users prefer best-of-breed solutions. Scenario modelling aids in decision-making based on strategic goals.
- Sourcing Strategies: Comparing best-cost country sourcing for savings with potential environmental impacts against local-for-local procurement for sustainability, resilience and innovation scores. Scenario modelling visualises trade-offs for informed decisions.
Benefits for modern procurement
Integrating business objectives ensures procurement decisions support overall strategies. This flexibility adapts to volatile markets, fostering collaboration across business units for unified goals.
Technology reshapes procurement, enhancing category management beyond tactical and operational processes.
As technology, including AI, machine learning and advanced analytics, revolutionises procurement work, solutions like akirolabs stand out with their innovative approach to strategic procurement and category management.
Leading analysts and thought leaders view akirolabs as a breakthrough innovation. Dr. Elouise Epstein, Kearney partner and digital procurement author, says “What akirolabs has created is significant.
"There is no doubt in my mind that this is a breakthrough innovation. akirolabs is on a trajectory to eliminate much of the category management function as we know it today.”
akirolabs - next gen category management
akirolabs presents a cutting-edge approach, weighing dimensions such as total cost, sustainability, resilience and innovation through Strategic Scenario Modelling (SSM).
Integrating AI with human intelligence enhances the strategy process. This framework offers a clear view of strategy impacts, achieving balanced, strategic alignment with business needs.
It uses AI, machine learning and advanced analytics to streamline decision-making and procurement processes. An AI-supported market intelligence crawler scans global markets for data, trends and insights, while a decision support engine aligns data with objectives.
Integration of procurement-specific large language models (LLMs) and machine learning ensures seamless data flow and consistency.
akirolabs elevates procurement from a functional to a strategic, value-adding role. This approach aligns with business goals, driving sustainability, resilience and innovation.
Embracing tools like akirolabs improves category management, ensuring procurement strategically contributes to business success.
Richard Crane, Chief Procurement Officer at Haleon, adds, “Very few software companies understand the challenges of a global procurement organisation that supports different businesses across many countries... akirolabs is a true thought leader in this space. Very excited to see the impact they're making for the procurement function.”
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