Archive: May, 2015

The state of category management today

In the early 1990s, my working life was dominated by the invitation to tender process and contract management. As the decade came to an end, the ITT process had evolved into the strategic sourcing process. At the time, the only difference seemed to be that I was encouraged to talk to internal stakeholder and suppliers. By the turn of the millennium I was introduced to category management which opened my eyes to the potential for procurement. Today most large procurement organisations use category management to drive value from complex third party spend. Or do they?

As a consultant, I have worked with clients in a wide variety of sectors. Most claim to use category management but very few are able to provide up-to-date category management plans. I have found a vast array of templates and many partially completed documents but hardly any plans that provide a framework for future procurement activity. I appreciate that category management often forms part of a hybrid organisation model combined with a functional approach or aligned to internal stakeholders. However, this should not be an excuse for a lack of understanding about supply and demand in key market.

In my experience, most organisations buy into the principles of category management but are unable to implement it effectively for three reasons. Firstly, they lack sufficient data about their own organisation and the markets they purchase from. Secondly, their staff lack the skills to analyse large volumes of data. Finally, senior management value sourcing and/or supplier relationship management more and therefore staff do not prioritise category management.

In short, effective category management requires a substantial investment in time and money. CHC can accelerate the development of category management and provide certainty about the return on investment. In the meantime, the procurement profession should continue to attract more people with strong analytical skills who will be able to utilise the growing market for spend analytics products to provide their organisations with game changing insights. Only then will we truly have the framework within which strategic sourcing, supplier relationship management and contract management all sit.