Category hierarchy, sometimes Category Mapping, Category Tree or Category Taxonomy, in procurement refers to the hierarchical structure used to organize and manage procurement categories based on their level of importance, complexity, and spend. A category hierarchy typically consists of multiple levels, with each level representing a different level of detail or granularity.
At the top of the hierarchy are high-level categories, such as "raw materials," "finished goods," or "services." These categories are then further divided into subcategories based on more specific characteristics, such as "steel" or "plastics" under "raw materials," or "marketing services" or "IT services" under "services."
Each level of the category hierarchy represents a different level of granularity and detail, with higher-level categories being broader and more general and lower-level categories being more specific and detailed. A well-designed category hierarchy can help procurement professionals to understand their procurement spend better, identify opportunities for cost savings and process improvements, and develop more effective sourcing strategies.