2025, ProcureCon MRO. Keynote Presentation MRO's Strategic Power: Driving Organizational Value Through Category Management

Announcer: All right, so I'd like to take this moment to introduce you to our first presenters of the day, Derek Richards and Marcella Vasquez of Gerdau North America. Let's give Derek and Marcella a warm procure con welcome.

Derek Richards, Procurement Manager, Indirect Materials – Gerdau North America: All right. Good morning everybody.

Marcela Vasquez, Category Manager MRO – Gerdau North America: Good morning.

Derek Richards, Procurement Manager, Indirect Materials – Gerdau North America: So for those of you who don't know the very first procure con MRO event was held here in Fort Worth, Texas back in 2018. So it was exciting to have something that's specific and dedicated to the MRO space 'cause it tends to get lost in some of the other things.

But it was a great event I had the chance to attend that. I'm excited to be back here today and excited to be talking about something that I'm very passionate about, which is category management within procurement. So quick introduction. My name's Derek Richards. I'm the procurement manager for indirect materials and services for Gerdau.

And I'm based out of Tampa, Florida.

Marcela Vasquez, Category Manager MRO – Gerdau North America: Good morning everybody. My name is Marcel Quez. I'm a category manager for indirect materials and services. I work for Gerdau and I'm based out of Cartersville, Georgia. And it's a pleasure to be here and connecting with, all of our colleagues. I've already made some friends like Leah and Ivan, so I love it.

I'm very excited to be here and to speaking for the first time, so

very good.

So we work for Geral. Geral is a steel manufacturer. We are, we have 11 locations across North America. We have about 6,500 employees and we melt, scrap, and we have 12.6 million tons of scrap recycling capacity a year. Our annual MRO spend a year is $350 million.

Derek Richards, Procurement Manager, Indirect Materials – Gerdau North America: So before we get started, just a little bit of backstory. I wanted to make a call out to NiTOR Partners. So category management is something that with Ada we've done for a long time. Back in 2021, we did bring in knee tour partners to give us an assessment of our current practice identify room for opportunities and improvement.

And we did adopt some of their framework and methodology. Some of it, which we're gonna see in the presentation today. So I did want to give a quick call out to them. But looking at it overall just touching on the full source to pay process that we've adopted really that breaks into two areas what we call the upstream, which is where you're focused on creating value and then the downstream, which is where we're focused on delivering that value.

And for us that breaks down into kind of an eight step process. Us

Marcela Vasquez, Category Manager MRO – Gerdau North America: being the first step of this process, spend analysis. I know we all familiar with this and this is where we take a little more time, the most but the spend analysis is really important for us to aggregate all our data, understand where our purchases are being made, where are they coming from, who are we getting them from so that gives us a really good idea and understanding of our data.Marcela Vasquez, Category Manager MRO – Gerdau North America: And and it's important to know that of course, in this stage is when we, if we don't have already categorized our categories is where we, within the MRO space, we categorize our purchases, our groups, and then we define exactly, the categories that make sense and put them together as well.

The next one is the next step in this process after the spend analysis category management. And we are gonna it's our topic today, so we're gonna dive in deeper on that on a later slide. But in a high level category management is where we set up a long-term strategy for a category basically.

So we're gonna have more information later on that. After we set up our strategy, of course we move on into strategic sourcing, two different and separate things for us. Our strategic sourcing is we've already set up our strategy category management. Now we go out to the market with RFPs, usually large spend.

We all know that, long SKUs. And we go out to the market and usually we do multi-year agreements and across where has 11 locations. So we do. Across multi-sites. So really large spend, but the strategic sourcing is an execution of the plan that we've already set in the category management.

So two different things. We wanna go out to the market when we already know the strategy we're going to apply. Of course we're not over. After we bid out everything and we awarded a supplier, we went back and forth on agreements and contracts. We did all the red lines. We negotiated the terms and conditions of those contracts.

We get it executed. Finally, we got everybody's signature, right? What a hassle. We have to really, follow them. And he, doc the e DocuSign is ready. Please, get it ready, sign it so it's all ready and done. But the contract management for us has two phases. The back end and the front end.

The front end is that we got it signed, it's already done. It's executed. But the back end is that we have to keep up with those expiration dates 'cause it's gonna come to an end. It's gonna have pricing revisions every year that we're gonna have to sit down with suppliers and see if there's any impacts on those materials, if we need to negotiate several different terms.

And also we have to keep up with expiration dates. So when we built our strategy and category management, we decided already, or at least planned what we were gonna do. When that expiration came to an end, are we going to bid it out again or are we going to renew with that supplier? What is our strategy there?

So that's the two ends of category of contract management. And that's where the process of the upstream, which is where we create a value ends, but it continues.

Derek Richards, Procurement Manager, Indirect Materials – Gerdau North America: So moving into the downstream, the first step here is supplier management. So that's a bit of a hybrid or a cross between the two.

Because those preferred suppliers that we have that are really part of our strategy we're gonna continue to manage a relationship with them. Quarterly business reviews, things like that. But as you guys know, the MRO space is very vast. So we're usually talking thousands of suppliers.

You're not gonna have a strategic relationship with every one of them. So that this piece falls within the downstream because it's every supplier you transact with, every PO that's out there, following up on open orders, expediting, dealing with any discrepancies. So supplier management piece is really in inside the downstream portion.

Next part of that is buying, which I'm sure all of you guys are familiar with. That's what most people think of when they think procurement is. You buy stuff. And that is part of it. But this is really the, the e-procurement, the. Procurement or the purchase requisition through approval, through purchase order out to the supplier and whatever system you use.

We happen to be an SAP Ariba customer. But, managing that whole process is within this step, which then transitions into the invoice and payment. So technically not handled by procurement. Typically, we have a separate accounts payable group to manage that, but it's still a critical part of our process within source to pay.

It's called source to pay. So we do collaborate heavily with them to ensure that process goes as smoothly as possible. And then last but not least, is governance. So that's really evaluating how we're doing. That's, establishing and monitoring all of our KPIs. Having routine check meetings and then evaluating how are we doing?

Is everything that we're looking to accomplish actually coming to fruition and or do we need to check and adjust? So this is a good slide to kinda lay out the process. But it makes it look very linear. You start here, you end there, and that's definitely not the case. No. So in this next slide it kind of illustrates, so same information, same process.

The upstream we're ma we're analyzing our spend, we're setting the strategy, we're going to the market and then we're managing the contracts. That's a continuous cycle for upstream. Same thing with downstream. That's a hyper cycle that's happening multiple times every single day that we're going through that process.

But the important piece here is ensuring that everything from your up upstream feeds into your downstream. That strategy. You set those goals, you have those intentions, and the way we see ourselves moving forward has to relate all the way into the downstream. You can have the greatest contract in the world, the best negotiation ever, if that doesn't follow through all the way to the purchase order.

You're not actually gonna deliver that value. So that's the importance there. It's making both sides, making sure both sides are working together. So now we're gonna do a little bit of a deep dive into the category management process. So by definition, category management is the development of a multi-year strategy.

What we call category strategy. Incorporate stakeholder management, current state review, market assessment. To identify and deliver value within the specific category, so pieces of your overall spend. And that breaks into four stages

Marcela Vasquez, Category Manager MRO – Gerdau North America: being the four stage category overview. So once we start our process, we start, first of all with the stakeholder identification.

We, have to identify who are those users and operations, the ones involved in all this that are gonna help us, meet our goals or work with us on this process. So really important to get them engaged from the beginning, identify, engaged. So we can, have we say their blessing or at least their knowledge on, Hey, we're working on this, you would be involved in this and have them engaged.

So stakeholder identification big. The next one is the category history. So those stakeholders have lots of knowledge and they know better what has worked for them, what hasn't worked for them. They have probably already tried several things with different suppliers, different products different brands, manufacturers.

So knowing that category history, what has already been tried or not it's really important for us because. The category might be at different maturity levels. Some of them will be underdeveloped, some might be really well developed. So that sets up they, we know where to pick it up from, right? We know what strategy is gonna work for that, depending on that level of maturity that the category has.

And again, the spend analysis. Our favorite, in this case, we know that on the source to pay process, we did a high level overview of the analysis. In this category management process, we do it a little more deeper. Actually way more deeper. We try to subcategorize our products within that category. We break it down into very little pieces, as many pieces as you can, because every one of those pieces might have a different strategy.

So we try to do that. And of course we know procurement. The procurement strategy is not a one size fit all. Correct. Who agrees? Everybody agrees. Yeah. So we need to really understand, those analysis and know every bit of it, because the better we know it, the better we'll manage it.

So that's on the category overview. Moving on to the internal review, that's the stage two of this process is the demand management. And of course, in the demand management, we wanna know. How is that demand coming to procurement? If it's coming from operations or for storeroom? If it's set up as VMI, if it's set up as, vending or how is that, category being the activity of the category itself.

That's gonna help us know what, how do we need to, or what can we implement or improve or, bring to the table. On the business requirement, again, the business requirement is sitting down with our stakeholders, understanding what do they want. But also what do they really need, right? Because they wanna want everything.

But let's be realistic. We're, we let's put some, things on the table and decide, and of course that is tied to the supplier review as well, because in the business requirements, maybe our stakeholders are wanting a technical visit from our suppliers every week or every month.

But if we don't know that we don't express or we don't set up those expectations with the suppliers, so their requirements. Are gonna fill in into the supplier review because we don't want bad reviews for a supplier if we have not told them this is what we expect from you. So the business requirement is really good to set them up and also express those to suppliers as well.

But again, on the supplier review, we do wanna learn which suppliers we wanna grow with and which suppliers we really wanna move away from. So depending on what the situation is, that's where we take action on.

Derek Richards, Procurement Manager, Indirect Materials – Gerdau North America: So then moving into stage three, we're now starting to focus externally, outside of our company.

And that really starts with, the market. So we do profiles on the market. We do profiles on the supplier profiles on the industry as well. We want to know everything that's going on outside that may end up affecting us internally. So a lot of evaluation there. So we can continue to monitor that.

Monitor that. And then we also take an extra step to really understand the production process. So the items that we're buying, how are they made, how are they built, what are they made out of? Where do we use them? Just to really continue to add. Again, the better we understand it, the better we can manage it.

So we want to have that insight and get a little more technical knowledge that helps us communicate with manufacturers or suppliers as well as internally with our stakeholders. But that information directly feeds into the cost drivers. So if we know how that product's made and what it's made out of, then we can tie that back to the market piece with published indexes and monitor that to know, things going up or down in the market, how that may impact us as as far as price.

And then the last stage is on category strategy. So a lot of additional analysis that goes into this. We do gap analysis, we do SWOT analysis, we do a risk assessment. We do the four quadrants with the CLIC matrix. All of those things bring us additional insight, additional knowledge and feed into our strategy.

So throughout the entire process, we should be coming up with kind of ideas and key takeaways and documenting those. And then stage four, we do an opportunity assessment to evaluate all the different things we wanna work on. And then prioritize, which ones are we gonna focus on now, which ones are we gonna do next?

And also having that forward vision of where do we want to be three years from now? Having that long-term vision. So all of that wraps up in a strategic review so that we've got our strategy, our path forward, and then we can share and align that with the organization. But a very important piece of this is ensuring that we've got stakeholder engagement through the entire process.

It's the first step there for a reason. This is not something that we want to do in a procurement silo where it's oh, this is procurement's idea. It's not, this is not actually gonna work. Including 'em in there has a lot of benefits.

Marcela Vasquez, Category Manager MRO – Gerdau North America: And again, stakeholder engagement as maybe I've said it several times, but I'm really passionate about it.

I love people. I love to interact. I love the challenge when they're hard to work with. So basically on the stakeholder engagement, we create that collaborative environment, include them in the team. We engage them and at the same time we gain so much knowledge from them. Those are the experts in the field.

We are procurement, we don't know, machines, equipment, or, pumps and oils and grease. We can learn it though from them. So really important to have that environment with them. Engage them from the beginning. Get that buy-in from the start. Because what would happen if we do all this work all this time, all this effort, and then they don't wanna go with it?

I know. I don't know if somebody might be in that situation right now. We've all been, but we, because we need to remember that stakeholders is like a big piece for this to happen and to be successful, and personally, I feel like it's really satisfying to complete a project, to manage a category where my stakeholders are engaged with me and then they know what I'm up to, and that they know that the results are expected and how much the results are.

They love savings, but they just need a little bit of. Our input, a little bit of our education on the side of, we need to go this way if you wanna get there, but can you work with me to get there? Can we do this? So that is really important and that's why we wanna highlight. That as procurement, we are salespeople too, right?

We have to get their buy-in on their, on the project so we can get where we need to get and we can bring that value to the company. So that's mostly what we wanna highlight in here. I hope it's, helpful and remember every time you have a challenge person that, that maybe does not wanna work or has done that for 50 years and is not willing to change, take up the challenge and try to engage them a little more.

Bring some donuts maybe, or, sit down with them or coffee, I don't know. But it works.

Derek Richards, Procurement Manager, Indirect Materials – Gerdau North America: So looking at the structure and the evolution, so we all work for different companies, varying sizes. Our procurement structures are probably a little bit different and, some big, some small. So I wanted to give some insight and advice on how to approach this regardless of your organization size.

So if you're a small organization, have a very small procurement team, you're probably wearing a lot of different hats. You're doing everything. It's probably not realistic that you're gonna go out and build this massive category management structure and devote all your time to it 'cause you got everything else going on.

So if that's the case, what I would recommend is trying to just be familiar with the process the strategy, the approach, and see how you can build that strategic mindset into your daily tasks. It can still factor into it and help lead to some improvement without the additional headcount.

In more of a medium sized organization. Again, you may still not have segregated resources, still doing everything at once, but maybe with more people a good bridge there may be using the seven step strategic sourcing process. What that does, it, it's, if you guys are not familiar with it, you can definitely Google it.

There's a lot of trainings out there. A lot of organizations use that as part of their training. But it incorporates some of the process that we covered. Into the strategic sourcing. It tends to be a little bit more short term in nature rather than the long term strategy, but it's still got a lot of really good steps that can help lead to further improvement in results.

So for large organizations where you've got a little bit more resources within procurement that's where we're at is we have a separate category management team. For us, we manage all of the upstream, so we do the analysis. The category management, strategic sourcing the contracts, and then we're the project managers that help roll that out into the organization.

And we separate that from the the buying team who's handling the day-to-day transactional piece. So if you can segregating that and having a real focus on it is really helpful. And then for the very large organizations that want have the ones that have a very robust procurement organization.

That have invested a lot in that kind of the best practice there is to be able to segregate everything. So you have a dedicated category manager who's fully focused on strategy. They then hand that off to a strategic sourcing specialist who's gonna go run that bid and negotiation. They then involve the contract team who's gonna go through that whole piece and execute the contract.

And then they may even have a separate team that's focused on running those projects. So that's the dream state, not something all of us are gonna be able to get to. But that's the evolution of you continue to provide that value, you invest more, and hopefully we can grow to that stage.

But I think the main takeaway here is really trying to focus on the strategic mindset and invest your time. Invest, whether it's people and or just time invest in planning and strategy. The more you do that, the more you're gonna evolve, the further into the maturity curve you're gonna get.

You can go from an organization that's just focused on price negotiations and trying to save costs. You can get deeper into that. You can get into the total cost of ownership opportunities. You can really partner with your maintenance and operations team to reduce downtime, increase efficiency, and that's really where the exponential value comes.

That's what your procurement wants or that's what your organization wants, is for you to partner with them, to lead them in that strategic mindset and to bring that additional value.

Marcela Vasquez, Category Manager MRO – Gerdau North America: Yeah. Thinking beyond price, right? Yes. Yes. And it's been a pleasure to be here with you. We hope that it was really useful, helpful for you guys, and you can take pieces of our, presentation with you and that you had enjoyed it.

And we are looking forward to meeting all of you and we're open for any questions if anybody wants to add anything or suggest or have a question, you're welcome. Yes. Great. I'll come

Announcer: around with the mic.

Audience: Good morning. Thank you for the presentation. It was really awesome. Your stakeholders, how do you classify them in terms of how they are strategic between like maintenance manager or production manager plan directors? How do you map. You stakeholders.

Derek Richards, Procurement Manager, Indirect Materials – Gerdau North America: Sure. So yeah, with within the process, we've got a little bit of framework as far as it's not super fancy.

It's a spreadsheet with columns and we fill it out. But again, it's gonna be different for every category. So certain categories are gonna be very big focus for the locations. And you're gonna have higher level people, maintenance manager, plant manager, like stuff like that involved. Other ones, if you're talking about, janitorial services, maybe not as much.

So we evaluate the category. We use the spend analysis to determine who are the people actually requesting it. We also look to see who their managers are and then just interacting a lot with them. We ask them, Hey, who else should be involved in this? Who do you recommend gets involved?

And we build that list and then have a core team and an extended team. Because in MRO you've got hundreds of stakeholders, not a few. So we, we've got an extended team and then a core team. The core team's typically who you involve in the planning. And the extended team's who you wanna keep informed and share the information with.

Marcela Vasquez, Category Manager MRO – Gerdau North America: Yeah. And sometimes the guys on the floor are usually the decision makers. The mechanic that's working with that grease is the one that does not wanna change it. So his manager is not gonna change. He is not gonna change anything. So chasing those people is starting. Plant manager.

Plant manager, your facilitator, your supervisor, and then the supervisor. Oh, nope. My main guy, my right hand guy. That's the one you need to talk to. So that's the one we're talking to. It's like chasing around who is really the indicated one. It takes a little bit to find that, but once you do it, it works.

You get them, and then you locked in the, the discussion. So yeah. Yes sir.

Audience: You mentioned earlier, doing market research on the MRO market. I was wondering if you have any recommendations or where do you find, where you where you've had some success in finding that market research specifically to MRO as a whole being as that it's a huge category with a lot of subcategories and things of that nature.

Derek Richards, Procurement Manager, Indirect Materials – Gerdau North America: Yeah. So again, Marcella hears me say this a million times. It depends on each category. But MRO in general there's a website called Industrial Distribution that I follow. They'll send out like a weekly newsletter. It keeps up with a lot of the core MRO suppliers, their financial results, whether they're growing acquisitions, stuff like that.

So that's been a helpful source for us. One thing we didn't point out here is really also continuing to partner with your suppliers utilizing them as a resource and input into your strategy. A lot of times you can learn a lot by just having quarterly business reviews with them, understanding how their business is going, what they're seeing in the market, what they're seeing from their competitors.

So that's the generalized piece and individual categories. You can then start to define specifically what's relevant for that and within that market, and then usually start to look into other areas as well.

Marcela Vasquez, Category Manager MRO – Gerdau North America: Yeah, suppliers is a really good source of information. And they actually like for us to get close to them and discuss all these kind of things.

They, it build brings you together a little more with your partner there and it, it's really beneficial for their business relationship. So thank you for the questions. Questions I think we have

Announcer: for questions, but I'm sure you can find Derek and Marcella at our break later today if you'd like to ask them anything.

So let's give them a round of applause.

Marcela Vasquez, Category Manager MRO – Gerdau North America: Thank you.