Categorical Plan

What is Categorical Plan?

A categorical plan is a valuable tool in the field of logistics that helps businesses effectively manage their purchased materials and suppliers. It involves categorizing these materials and suppliers based on their product type, using departments or functional areas within the organization. By doing so, businesses can evaluate suppliers in groups, which allows for a more streamlined and efficient procurement process.

The primary purpose of a categorical plan is to simplify the evaluation and selection of suppliers by grouping them based on the type of products they provide. This categorization enables businesses to focus their attention on specific areas and make informed decisions regarding supplier selection. For example, if a company needs to purchase raw materials for its manufacturing process, it can create a category specifically for raw material suppliers. This allows the company to evaluate and compare different suppliers within this category, considering factors such as quality, price, and delivery time.

Categorical plans are particularly useful for businesses that deal with a wide range of products and have multiple departments or functional areas. By organizing suppliers into categories, businesses can ensure that each department or functional area has access to the most suitable suppliers for their specific needs. This not only improves efficiency but also enhances the overall quality of the products or services provided by the organization.

One common approach to evaluating suppliers within a categorical plan is the weighted-point plan. This method assigns weights to different evaluation criteria based on their importance to the organization. For example, quality may be assigned a higher weight than price or delivery time. By using this approach, businesses can objectively assess suppliers within each category and make decisions based on a comprehensive evaluation.

In conclusion, a categorical plan is a valuable tool in logistics that helps businesses categorize purchased materials and suppliers based on product type. By doing so, businesses can evaluate suppliers in groups, streamline the procurement process, and make informed decisions regarding supplier selection. The use of a weighted-point plan further enhances the effectiveness of a categorical plan by assigning weights to different evaluation criteria. By implementing a categorical plan, businesses can optimize their supply chain management and improve overall operational efficiency.