Category Management: 11 Things We Learned
- Category Management
The results from the Future Purchasing Global Category Management Survey are out.
The focus this year is on business collaboration and how successful implementation increases the value of category management. There’s lots of insight but we’ve picked out the top 11 facts that differentiate the leaders from the followers.
Don’t just talk cost.
If your Category Managers don’t talk about price, cost, revenue and risk terms with their stakeholders then they are not being business people, who happen to do procurement.
If they just talk cost, or worse just price, then the opportunity will likely still be very high. Consider bringing in a third party to do a review of the opportunity. You might find the results illuminating.
Improve procurement capability
Successful category management leaders have either successfully developed the category management capability of their team, or recruited category managers that already understand the process.
With a business case that could triple or more the returns from procurement activity, building excellent capability to apply the process needs to be a focus.
Create a learning and development program for your team. Don’t be tempted to ‘sheep dip’ everyone in the same training and coaching.
Leaders build team competency increasingly by separating out category management activities from routine sourcing and transaction activities – to provide category managers with sufficient time to focus and practice.
Focus learning programmes initially on those leaders that need to deliver it. Whilst internal delivery of coaching and mentoring is good, try to ensure a blend between internal and external delivery to challenge entrenched thinking and bring in new ideas.
And finally, don’t forget to provide some coaching to the procurement leadership team – don’t assume because they are in senior roles, that they know everything too. Some 1-2-1 coaching can work really well to ensure they grow in confidence and help to steer the team on a daily basis in the right way to suit a category management approach.
Do more category strategies
Assess what % of your total spend you have a robust category strategy for. Be challenging to yourself, just because you have put a long-term deal in place does not mean you have a category strategy in place.
A category strategy would have been pulled together within a cross-functional team. Based on evidence gathered through research and analysis, plus imagination from colleagues some strategic options would have been generated and evaluated. And an implementation plan pulled together, which is delivering.
So, assess where you really are and put in place a realistic target to increase category strategy coverage over the next one to two years. As this is a key indicator of category management success and adoption, it needs focus.
Embed categorycanagement in your organisation
It is a fact that category management has never been embedded in an organisation that has a half-hearted commitment to the approach and there are many examples of toolkits “sat-on-the-shelf” gathering dust.
Ask yourself are you fully behind this and then commit fully to it. You need a process, you need to develop the resources, you need to educate the business, and you need to provide enough time for the team, and enough enablers for the team to do their job. But first, decide in your process what to mandate to raise standards.
All approaches to mandating specific activities and outputs must be customised to the environment in each organisation. Leaders categorise projects into specific types and decide the small number of tools and activities that must be used for each project type. Leaders document their mandated activities, measure compliance levels and review mandated activities at formal reviews and decision gates. If you’re not doing that, put in place a plan to do that.
Remember where there is no framework or leadership commitment to a category management way of working, there is always going to be limited adoption of the approach and coverage of the total spend with category management. Leaders are more likely to prescribe tools and activities, and the leaders save nearly three times more than followers.
Find more time
For category managers, the first step is to analyse workload and reduce low-value-added activities (e.g. P2P) or create a separate team to handle these.
A category plan should be created for each individual – built and agreed upon by the category manager and their line manager that realistically assesses what is possible given other activities, and makes a case for investment in temporary or other resources if not.
Build a procurement PR campaign
We procurement folk want other functional experts to pull on our expertise but you can reverse this in building a PR campaign.
We suggest pulling on marketing or sales colleagues to help you learn to sell the benefits of procurement in your business. You’ll likely build a great relationship, a further understanding of the business and get some great new creative ideas to boot.
They say that something needs to be said at least 11 times before it’s heard – so maybe it’s the same with shouting about those category management successes. So, say it, explain it, show it, act it, video it, newsletter it, present it, highlight it, email it, tweet it, blog it…. That’s 11!
Have a flexible approach to category management
If you are one of the third that have not articulated a modulated, flexible process for your category management activities in a way that this one process can be used for all spend and category projects, then look to do so.
Identify what aspects of your process are ‘mandatory’ in all circumstances and make that process your “Light CatMan” process, add a few more for something a little more rigorous for a “standard CatMan” process and plenty more for a “Major CatMan” process.
Two levels of flexibility are probably not enough, and more than four is probably overkill. Then work out some SIMPLE key guiding criteria to help your team work out which process to choose.
Beware: don’t get too academic about all this – if you start to make it too tricky the teams will lose the will to live, and just do it the way they always have done! The acid test is can you keep the guiding ‘rules’ on 1 page? Is it understandable in 1 explanation? If the answer is yes, you’re in good shape!
Balance your resources
A good organisation design does not assume all staff are permanent – transactional and tactical work are ongoing needs and may be best resourced with permanent staff, but some strategic work may well be best manned by interims or consultants who bring their expertise in to challenge and bring new ideas, and lessen the time allocation over implementation to light project overview only.
Additionally, annual category group planning will determine priorities for the next year – sometimes you will get a priority project that just needs a specialist on the team, as a temporary measure.
A core team plus associates is a tried and tested model that works for many sectors from builders, various trades and professional services firms.
The marketing function has been doing it for years – outsourcing brand strategy creation for example – and it’s high time procurement started to do the same. Be flexible.
One way of working
Leaders make category management their ‘one way of working’ by driving all activity through a single category management structure and process. If you don’t have a single category management process, with guides, templates and tools, get one: this is Category Management 101.
Either buy it in, or create it yourself but remember if you create it yourself this will take a lot of time, when your time might be more valuably applied creating value for the business rather than process. Ideally have this housed online – manual category management processes are now quite clunky and out-of-date in this digital age, and slows teams down.
Remember to consider the wider aspects of making this process work. This isn’t just the domain of the procurement function, but requires a wider business readiness for a focussed category management approach.
Establishing the maturity of procurement capability across key areas such as Business Alignment, Structure and Governance, Leadership, People & Team Strength, Process Excellence & Technology and Category & Supplier Management processes are a key five of 10 I would recommend. Conduct a gap analysis of where you are now, and where you need to be to realise the strategic objectives of the business and plan realistically how you will close the gaps.
Remember: getting a category management process ‘scribed’ is relatively easy, working out how to make it ‘stick’ as the one way of working isn’t.
Set formal category management objectives
It is possible that Procurement teams have not been successful in persuading their business stakeholders of the value of category management and the importance of it being a cross-functional cross-business way of working that benefits all parties, not just procurement.
More proactive communication is needed to reverse this damaging trend because the only way that category management can truly work and realise those optimum levels that all respondents universally said were possible, is for procurement and category management to be seen as a business process, and not just something those ‘procurement people’ do. Setting business-wide objectives is key to this.
Identify breakthrough value opportunities
Ultimately category management is about finding additional value for the organisation throughout the full value chain from downstream customers, right upstream from first-tier suppliers and onwards.
This could take the form of relatively small incremental improvements through to breakthrough opportunities that challenge the status quo and provide new ways of doing things. The process and toolkit needs to support the identification of breakthroughs in a systematic way with a common language that can be used across the team and stakeholders.
About the authors
Future Purchasing is a specialist procurement consultancy formed in 2002 and with its head office in Guildford, UK. They are acknowledged experts in highly practical procurement transformation, with a strong track record in cost reduction, category management and performance learning.
The findings above are from the Future Purchasing 2016-17 Global Category Management Leadership Report titled, “Collaborating for Category Management Success. Bridging the Performance and Value Gap.”