Category Management enabled procurement transformation: designed and implemented for Pharmaceutical Sector

Case study

Category Management enabled procurement transformation for Pharmaceutical Sector

By Future Purchasing |

Sector

PHARMACEUTICALS
& HEALTHCARE

Areas of Expertise

CATEGORY MANAGEMENT
SUPPLIER MANAGEMENT
NEGOTIATION

Service

CONSULTING
TRAINING
COACHING

Business situation

Facing challenges such as a dwindling product pipeline and escalating costs, a leading global pharmaceutical company with a focus on neuroscience brain disorders recognised the need for a radical transformation in its procurement operations. The absence of a uniform sourcing process and the limited involvement and control of the procurement team across various spend areas had relegated them to mere “order raisers” or contract administrators, rather than strategic partners in the organisation.

In response, the company appointed a visionary new Chief Procurement Officer (CPO) tasked with a clear mission to elevate Procurement from a transactional function to a strategic pillar within the company. This ambitious transformation was to be fuelled by the initiation of a ‘quick-wins’ savings program, aiming not only to generate immediate financial benefits but also to lay the groundwork for long-term operational excellence..

Solution implemented

In collaboration with the newly appointed CPO, Future Purchasing embarked on crafting a comprehensive procurement strategy aimed at revolutionising the company’s approach to procurement. The strategy set ambitious objectives, including expanding the scope of spend to be covered by category strategies, achieving annual savings targets of over 10%, and significantly enhancing the skill set of the procurement team to meet these challenges head-on. To kickstart this transformation, a detailed 100-day plan was developed that redefined procurement’s role within the organisation as a strategic and value-driven function.

1. Quick wins savings programme

A quick-wins savings programme was set up to generate funds to invest in the procurement transformation journey. A joint Future Purchasing/customer team was set up to identify a pipeline of potential cost opportunities with a 12% cost down target to be completed in 8 weeks. The scope was limited to targeted supplier negotiations and there were four steps:

2. New category management process & toolkit designed.

Programme design

Programme plan created with agreed deliverables around the new category management process. Procurement Leadership Team (PLT) diagnostic questionnaire issued to establish current views on how best to implement category management. Results shared with the PLT to facilitate successful implementation.

Process design

A client design team was set up with Future Purchasing to co-develop a new “fit-for-purpose” category management process focused on value levers, strategy creation and a sensible modulation of activity as a “one size fit all” approach would not work. Focus was on selecting which tools and templates to use for different size and complexity of project. Final approved process & toolkit were made available to the category teams.

3. Category management training and coaching.

Education & training

Future Purchasing designed a customised workshop training plan with a balance between soft and hard skills training. The category management training workshops were interactively run for approximately 40 people with an outstanding feedback rating of 97%.

Coaching support

Coaching support: Category management coaching was provided for individual sub-category projects where each session was 1.5 hours every 2 weeks. CM coaching clinics were also set up for small groups of 3-4 focusing on specific tools e.g. business requirements, negotiation, creativity & options generation. This created a learning environment for category managers to discuss and share their experiences and improve their understanding of how to make the process work better.

Category Management training and coaching process

Category Management enabled procurement transformation: designed and implemented for Pharmaceutical Sector

Transformation Outcomes

The transformative category management program spearheaded by the new CPO and Future Purchasing culminated in delivering remarkable savings of 11% reduction over a 12-month period. This initiative not only introduced category management as a fundamental practice within the business but also profoundly embedded it into the organisational ethos. As a direct result, the procurement team underwent significant upskilling in category management, which in turn fostered enhanced relationships with stakeholders across the business. Procurement transformed itself from a functional necessity to a strategic partner, now perceived as a positive force for change and innovation within the company.

Significant category savings projects included:

savings on telecoms category via a competitive tendering process.

savings in lab consumables by 50% reduction in suppliers with a much-improved level of service provided to the end users.

savings by consolidating lab service contracts through three main suppliers instead of 120 suppliers previously.

cost savings by changing the Canteen provider together with improved service guarantees.

cost saving in recruitment services with improved frame agreements with preferred suppliers.

Related Expertise

Supplier management

Our supplier management approach combines excellent tools and techniques across the full range of activity, from segmentation, through performance measurement and improvement and through to relationship strategy development.

Category management

Excellence in Category Management gives multipliers of value delivery compared to less effective programs. Our approach, delivers a high performing team and process which provides sustainable value over years rather than months.

negotiating for procurement

Our approach to procurement negotiation helps teams to improve performance, track their progress, measure success and secure rapid payback to programme costs. It is based on four principles…

Future Purchasing

If you want to get more value out of your procurement spend, or you just want to know more about us, request a callback above or send us an email and we will come straight back to you.

HS2 sized scaled

Case study

Andrew Cubitt interview – Category management is a top procurement priority for wider spend efficiency at HS2

By Future Purchasing |

Sector

PUBLIC SECTOR

Areas of Expertise

CATEGORY MANAGEMENT
BUSINESS PARTNERING

Service

CONSULTANCY

Andrew Cubitt - Procurement & Supply Chain Director at HS2

As Andrew Cubitt is Procurement & Supply Chain Director at HS2 Ltd, the company responsible for developing and delivering a second high-speed rail network across the UK.

HS2 is a mammoth engineering and infrastructure project that will provide fast and frequent connections for over 100 cities and towns, opening up local and regional markets, attracting investment and improving job opportunities for thousands of people. Accordingly, the anticipated spend is sizeable, in the region of £100 billion.

Cubitt, with 20 years of experience in the transport and consultancy sectors, oversees a team of about 315 people from procurement and commercial (not counting the many subcontractor teams) who are involved in making sure this spend is efficiently deployed. To do this he takes a total cost of ownership approach to the purchasing decisions over the lifetime of this project, and to support this he endorses category management as one of his top-three procurement priorities.

Why category management is a top 3 priority

While category management as a term is not widely adopted in infrastructure programmes, being borne out of the automotive and fmcg industries, it does apply as a sourcing strategy to key commodities, like steel and concrete.

“We use basic category management principles to ensure we are buying efficiently, sustainably and at the right price and right quantity at the right time,” he explains. “To this end, category management can be applied to any industry, and for us, even though we do not source directly, it is one of our top three priorities because we need to know how what we buy, directly or indirectly, affects both the economy and wellbeing of the planet. So as a strategy for the supply chain team, it is on a par with risk management, because at HS2 we are always considering our wider political, commercial and environmental impact on the market. Category management therefore is a facilitator to make sure risks are managed effectively and messages supported.”

How well is this understood and adopted by other stakeholders?

“It’s important to remember that as with all major infrastructure programmes, you tend to be working with large tier-one contractors. So it’s more of a consolidation contract. But underneath that tier one, it’s vital to us that the sub-contractors also take a category management-centred approach seriously. For this reason we are interested in getting the right partners for all of our contracts. Fortunately in the supply chain we are seeing a lot more focus placed on ‘buying better’ and ‘buying right.’ So what we do have control over is influencing our supply chain to make sure they get the best value from the materials they are buying while not impacting the ready supply in the market.

“It’s therefore imperative we take a good look at how the construction firms in our supply chain undertake category management. In recent years we’ve started to place greater emphasis on getting involved in that, and the next phase of the programme will see that focus increase with our T2 and T3 suppliers as we encourage them to give feedback and follow that route for project success.

“Having world-class category management strategies is not something suppliers deeper in the supply chain are known for, so this is a way to influence practices directly to help them raise their game. And as I am responsible for overseeing supply chain partnerships, it’s my team’s duty to make sure that the lots we are buying are bought in the best way that delivers most value. It’s seriously important today to act responsibly and not starve the world market of its commodities, be that steel, concrete or labour.”

HS2 category management2

Co-creation of strategies for outcomes

Findings from the global category management survey show that involving stakeholders and co-crating strategies leads to better value and outcomes. And at HS2 this is also recognised.

“Value is always a lever for us,” says Cubitt. “It is at the core of our role in procurement to bring tax-payer value, so we are always looking for opportunities to improve it. And that’s where a good strategic sourcing approach comes into play. To achieve that we have created a collaboration hub across our T1, T2 and T3 suppliers where value is the primary driver. They share knowledge about various categories, and, for example, this resulted in leveraging electricity and other utility bills to drive direct savings for our suppliers. Of course there are other advantages too to a joint catman approach, like understanding the economic effect of buying in bulk.”

So co-creation of category strategies with other stakeholders, both internal and external, is important and shows how value can be derived when strategies are aligned.

Category management is also a strategy for sustainability

Category management deployment can support other important business performance levers, a topical and vital one of which is the firm’s sustainability agenda.

“It’s important that the procurement team secure the full range of value from a category management strategy, including risk reduction, supplier innovation, speed to market and not solely cost reduction,” he says. “But it’s interesting how it can help towards sustainability goals. At HS2 we are pushing hard for procurement and the supply chain to be the leading force on driving carbon net zero. As an organisation we want to achieve this by 2025, which is a big ask on a construction programme, because clearly there’s a lot of carbon that goes into a project like this. The way we see this happening is through design and having sensible conversations with the supply chain.

For example, that might include altering the way you construct to reduce how much steel is used, and this is where category approaches come into play and have a big impact.” Cubitt endorses that category management is not just about deriving financial value, the true value lies in understanding all the different dynamics of suppliers, risk avoidance and sourcing socially and how you bring them all together.

Procurement’s value proposition is enhanced

What category management also helps to drive is procurement’s own value proposition, to be more than the cost reducer.

“I want my team of procurement people to be more than traditional procurement people!” he says. “Category management does that for them because as individuals they get to be experts in their own field. For example, take our people buying rail. They are the true specialists in that category, so for them it not only helps with their personal development but because the business comes to them for specialist advice in their area, they in turn become strategic advisors —not just gate keepers and box tickers. They apply their knowledge to help put partnerships and strategies in place, and this is very important for the whole project.”

Given the priority Cubitt gives this in his own organisation, the question is, is this structure something he can mirror in his T1 subcontractors?

“This is something that we perceive as a key focus,” he says. “And it’s something we are starting to invest more effort into. Clearly we don’t buy everything ourselves, unless it’s railway crossings and switches, it’s a partnership of many teams. So real value comes from supply chain discussions and matching category expertise across them.”

Gaining visibility

The big difference for a project like this, is that many subcontractors are coming together with a single goal. It’s not one procurement team, it’s a “team of teams,” as Cubitt calls it. So a challenge for the category manager is to secure visibility when they are not buying directly.

“It’s an evolution for them,” he says. “The collaboration hub is a good way to achieve this, but the value comes from influencing where we need to apply pressure in the market and where we need to understand the wider effects of what we’re doing. So we all have a responsibility at HS2 to really think about how we are spending and make sure our partners do the same — that’s the key to success going forward.”

Clearly, instilling this thinking to achieve the full range of value is challenging because it’s such a mammoth project. Cubitt recognises that procurement people in his T1s and T2s have their own relationships with their supply chain and are doing things in their own way. His answer is to encourage them to think about the wider picture, and not to focus just on their part in the project or their own jobs. He emphasises that it’s one project and everyone is part of it.

“There’s a whole range, even thousands, of suppliers, often buying the same materials,” he explains, “and it’s a powerful concept to leverage that full capability. So it’s my job to bring it up to a level where we all understand the full picture, work together and empower them with the knowledge to do so.”

“In our team of teams we clearly have other heads of procurement, and it’s natural that not everyone will agree. So employing a more category-centric thought process to the things that are strategically important to HS2, like ‘building back together’ is the way to bring engineering and delivery together. We are focusing on the category and getting the right people involved.”

The right people …

Of course, on a big project like this, it’s important to keep capabilities up to speed. “To be good at category management you need to be good at understanding and manipulating data,” says Cubitt. “So a key area I’m trying to get our procurement and supply chain people up to speed with is data crunching, because I think data literacy is a key area for our profession that will make us more rounded.”

“I’ve come to the conclusion over my years at TfL and PwC that you have people that are really good at doing procurement and running a process — and we need them. But it’s not always the same people who can run your category strategies. These are the people who really understand category spend and can push our agenda in the supply chain where the categories really matter.

“At HS2 we have a golden opportunity to change the way procurement and the supply chain is perceived, because we’re a big team with big responsibilities, and it’s politically charged. So it has all the potential to be a perfect storm of things that could go wrong — so we need the best procurement and category managers to make sure they don’t. Success for me will be when all the T1 contracts are in place and recognised by the industry as having really good structures to engage the supply chain and to understand how we are affecting economics and markets in niche categories.”

… and speaking of structure

At a time when we are seeing a splitting of roles, that is category creation versus the go-to-market phase, we wondered whether the capability structure is a mixture of people doing both, or whether some are focusing on strategy while others focus on sourcing.

Category management Is a top procurement priority for wider spend efficiency at HS2

“At HS2 it works slightly differently. If you set the strategy with one part of the team and the delivery with the sourcing team, the sourcing team might not agree with the way the strategy has been written. So that’s a challenge when roles are split.

“What we do try to do is co-create strategies with the T1 providers. We’ve already pulled together some high-level strategies and we’ve started to share them with the supply chain, but this can get very involved. As an approach this is definitely leading edge, because mapping the whole spend under control versus the spend that goes on elsewhere, means you can see where leveraging can best take place. If you don’t get your arms around the whole of the spend then you can only influence part of it.

Getting organisations to embrace category management

“In my experience, from the organisations I’ve worked in with no repeatable spend, category management as a concept is quite difficult for executives and engineering to understand, which is a barrier. So to break that barrier down you have to make the value real and tangible against levels of spend for private sector companies. So the way to make category management work for the public sector is to devote focus on the value creation in private sector contracts and suppliers — and that’s what HS2 is going to do.”

Related Expertise

Supplier management

Our supplier management approach combines excellent tools and techniques across the full range of activity, from segmentation, through performance measurement and improvement and through to relationship strategy development.

Category management

Excellence in Category Management gives multipliers of value delivery compared to less effective programs. Our approach, delivers a high performing team and process which provides sustainable value over years rather than months.

Future Purchasing

If you want to get more value out of your procurement spend, or you just want to know more about us, request a callback above or send us an email and we will come straight back to you.

Interview with Mark Smith - A lean category management model is at the heart of procurement at bp

Case study

Mark Smith interview – A lean category management model is at the heart of procurement at bp

By Future Purchasing |

Sector

OIL, GAS,
CHEMICALS & MINING

Areas of Expertise

CATEGORY MANAGEMENT
BUSINESS PARTNERING

Service

CONSULTANCY

A core tenet of the 2021 Global Category Management study is to provide organisations with the business case for securing, and the practical guidance needed to embed, good category management practices.

Category management, done well, provides purchasers in any industry with a strategy and business process to help achieve long-term business goals and contribute to overall business performance.

There are many reasons why procurement leads are making category management a strategic priority, and in order to understand the many facets that inform their decision we have been talking with various heads of procurement who are successfully employing a category management approach.

Mark Smith - Procurement Vice President, Digital & Talent Supply at bp plc

Mark Smith is Procurement Vice President, Digital & Talent Supply at bp plc., a multinational oil and gas company headquartered in London and one of the world’s seven oil and gas “supermajors,” now on a mission to drive the transition to lower carbon sources. Mark has also been responsible for strategy and transformation for all corporate-wide procurement activities across BP, and as such has discovered extensively how category management can play a large role in helping an organisation reach its performance goals.

Contextualising category management

At bp Mark places a high emphasis on category management. “Though it isn’t always known by that name, it’s what sits at the heart of what we do,” he says.

Why category management holds such a high status at BP Procurement is tied up with the company’s ambition for #bpNetZero and its target of 50GW of renewable energy production before 2030, which undoubtedly will include off-shore wind, solar energy, hydrogen projects and initiatives for sustainable transport systems.

“We absolutely consider category management as a key priority,” he says, “because in response to market dynamics today, the agenda of our function is shifting, and it’s imperative that we support that by paying close attention to how we are managing our relationships with suppliers and the supply base, and we do that through category management.”

“Traditionally procurement has placed most emphasis on the process compliance and volume leverage aspects of its mandate for go-to-market activity,” he believes. “Negotiation and price savings have dominated. But I do believe we’ve all been on a journey to change that perception of the function, and we all feel a greater responsibility to use the demands we make on the supply chain to further the goals of our organisations — and more and more these go broader than just bottom-line profit.”

bp is concentrating on four main initiatives that go way beyond procurement’s historical remit where category management will have a critical role.

Profitability

“Basically, you’ve got to have the underlying execution infrastructure working for you, whether that be through your catalogues or your channels. Cost is driven by a factor of price, but more materially, the volume of units demanded, their spec and so on all influence the price you pay and the cost you spend. You need to look at the dynamics around constrained markets, inflation, opportunities to respecify, how you get the best value for your spend from total cost as opposed to unit price — these are some of the levers category management allows you to pull if you have the right channels set up to execute and provide you with the appropriate data upon which to act.”

Relationships/collaboration

“We are engaged in more conversations than ever about business change. Our supply network is now multimodal as opposed to bipolar; the linear relationship between customers and suppliers is changing; our suppliers are becoming our customers, our competitors, our partners, and so on. How you look at that holistically in a business that is doubling its customer touch points, and how you use your existing relationships to understand where those partnerships can go deeper to create new business opportunities and revenue streams, is another avenue that category management opens up. It helps us understand what the future will look like.”

ESG

“ESG is growing in significance, not just for people and the planet, but in the investment climate too where it will be as important from an investor performance perspective as your traditional bottom line. The supply chain plays a huge role in that through your carbon emissions and the impact you have on the planet and through the opportunities you have to influence these with your supply decisions. You have to think strategically about how you engage your supply base, and again that’s a lever of category management.”

Innovation

“Innovation is critical in this rapidly changing world. No one company has the monopoly on ideas, so how you go about getting those ideas that will give you a competitive differentiator, whether through tech, customer experience or the many opportunities in the innovation space, is another reason to harness category management to your advantage.”

“For me, category management is how you bring these four organisational impacts together. It drives how you think about the needs of the organisation and the market as it exists. It helps you purposefully place that spend under your control to generate those outcomes in equal measure, rather than just addressing it reactively.”

Category structure for the holistic picture

bp has created a dedicated sustainable procurement organisation that works specifically with the categories on some of the things that will generate equity, grow spend with diverse suppliers and bring diverse talent into the supply chain. Mark’s role is in the indirect portfolio, so anything related to digital spend, and labour-based services, plus anything that makes that productive, is under his control.

“We’ve moved to a much leaner category model,” he says, “and although it sounds counter-intuitive, we have put category management at the heart of what we do by shrinking the categories themselves and growing our agile teams who look at how we commercially transform the supply base, how we create value for the organisation and how we create the big-ticket transformational change agendas.”

“One of the blockers to genuine category management,” he finds, “is putting people in category silos who only have the resource to look at their own four walls — that can constrain capability and thinking as often categories of different values, maturities and opportunities are given proportionally the same level of resource and attention.” So Mark tries to resource accordingly, and baseload in groups of alike category. He then has a separate team which he uses in an agile way to support their strategies. “Because we are all working to the same organisational goals,” he says.

“We have three teams. One focuses on transformation, in effect they are the ‘elite squad’ for category management and category strategy. They are well practiced in using the various category management techniques to create really compelling transformational strategies and execute them, because they are doing this with everyday frequency rather than once every 3-5 years.”

“We then have a team we call ‘procurement innovation’ and their role is rapid collaboration – we’ve created a methodology to bring together stakeholders and suppliers to solve specific business problems that generally ends in a supply decision.”

“And we have third team called ‘supply innovation.’ I think category teams are too easily consumed by the day-to-day – the stakeholder who shouts loudest or the strategy they are trying to implement — to spend time purposefully and somewhat speculatively in the market, for example to understand what a good technology roadmap looks like. I think theoretically this has always been a key component of category management, but in my experience it’s the thing that drops to the bottom of the list when time and resource is limited.”

“So what we are trying to do is create specific teams that are talking to the big existing suppliers, about what they offer or the parts of their portfolios that we don’t currently use but should do, and newer suppliers or sources of tech that we should be brining into the organisation.”

“What these teams are doing is part of the standard category management toolkit, but we are trying to give it its own real dedicated focus to make sure that happens on a regular basis.”

This is innovative in itself, separating out the strategy from the implementation, rather than bundling it together, which is often the result of resource constraints. Basically what Mark has done is put the bigger proportion of resource in the three agile teams. It was a conscious decision to emphasise the strategic category focus by placing it in these fluid teams separate from the category families, so it doesn’t compete for time with all the BAU distractions — testimony to the importance they place on that.

As part of their day job category managers perform the core elements of category management for major category families, working with the agile teams to build multi-year pipelines of transformation activity.

Having a three-team approach does require a governance model. Mark created a collegiate team across those areas and removed what he calls “the systematic disincentives of playing for the house.” No-one stands alone, and everyone has a stake in each other’s success, because “you can’t hit your own numbers to the exclusion of everyone else,” he says. “All targets are at leadership team level and we’re all accountable for them.”

To achieve this, he says, “you are effectively disrupting what the organisation has grown up comfortably doing. In reality you are asking people to be the architects of supply solutions and move out of the space of their own category, the negotiations and the savings, towards the go-to market activity.”

Three success factors for innovative category management

In Mark’s experience, category management has lots of potential, but it has traditionally been executed largely as a strategic sourcing process. “There is nothing to stop anyone adopting it,” he says, “but to be successful you need to do three things:

Working with stakeholders for better outcomes

Mark’s long-term and deeply held belief in how they are operating is being met with approval from stakeholders, and he is delighted that they are starting to see procurement no longer as the ‘blocker’ that slows down the buying process for the sake of a saving that might make up just a small slice of the stakeholder’s value proposition.

“They see us more as the people who can actually work with them on what really matters to them,” he says. “Savings of course are important to people under budget pressures, and that must be serviced, but seeing the bigger picture and offering the kind of strategic thinking they want from someone in a commercial role is definitely more valuable. It has helped us get good business outcomes with suppliers too.”

A new procurement world

This way of working is not for everyone, especially for those who like to be in complete control of a rigidly defined portfolio. But Mark confirms that category management will always have a place for everyone. “In the long run, we are building a new procurement function on the basis of the digital tools available and new sources of supply, but that doesn’t mean there isn’t space for anyone who wants to continue building their career in the more traditional sense. But the future will look very different and procurement will be attracting more diverse talent.”

bp Interview

And in that new procurement world, performance measurement will have to look very different too. “You have to be more holistic about how you do that,” he says, “as well as measuring the likes of cost value and revenue generation, you must think about measures for ESG goals, aims, timeframes, provenance, net zero, etc., because that time has come. The business will want to see the whole value chain and where cost was added and at which part. So that’s another very different mindset from what we are used to in procurement. So we run a six-weekly showcase of achievement which deliberately does not highlight savings — that way doing transformative work gets rewarded and recognised.”

“However, we must be mindful that we are making some fundamental changes to our business. It’s a big shift from what was a stable business model, with linear supply chains. But that time has changed, and we have to change with it. There’s now a need for different suppliers, a need to operate in different markets and geographies and businesses. Everything has become much more customer-focused, and in that, both organisational change and procurement change are symbiotic.”

Basically, this change has been coming for years. If your organisation wants to keep up with the modern challenges and changes, then it needs a supply organisation that can help it do that. “We’ve had a big reset moment,” says Mark. “We had built an engine that takes what the business wants, stops it, and gives back something a bit cheaper – now we are listening and providing options the business can use. So a category management approach, that is agile, thinks holistically, has clear business aims and is structured to deliver wider organisational value, is the right path to deliver that.”

Related Expertise

Supplier management

Our supplier management approach combines excellent tools and techniques across the full range of activity, from segmentation, through performance measurement and improvement and through to relationship strategy development.

Category management

Excellence in Category Management gives multipliers of value delivery compared to less effective programs. Our approach, delivers a high performing team and process which provides sustainable value over years rather than months.

Future Purchasing

If you want to get more value out of your procurement spend, or you just want to know more about us, request a callback above or send us an email and we will come straight back to you.

Said Al Alawi interview - Collaboration with the business is a category management strategic priority at PDO

Case study

Said Al Alawi interview – Collaboration with the business is a category management strategic priority at PDO

By Future Purchasing |

Sector

OIL, GAS, CHEMICALS
& MINING

Areas of Expertise

CATEGORY MANAGEMENT
BUSINESS PARTNERING

Service

CONSULTANCY

Category management has been a top priority over the past four years for exploration and production company, Petroleum Development Oman (PDO).

While the value of a category management approach was well recognised, it was collaboration with the business that was found to be a challenge, since the Contracting and Procurement (C&P) team had tended to work in a silo.

What triggered a change in perception and operation was when PDO senior management recognised C&P’s ability to contribute to short-term profitability during the dual shock of Covid-19 and the oil price collapse in 2020.

Said Al Alawi, Former Head of CP, Petroleum Development Oman

The C&P leadership team began measures to rectify this. The now former Head of C&P, Said Al Alawi, had been responsible for driving and managing contracting and procurement strategy, planning, and operational excellence to meet the overall business objectives of PDO. In that, he supported directors and other stakeholders involved in the company’s C&P environment to develop well-managed, well-targeted and sustainable C&P strategies that deliver cost optimisation, innovative solutions and strategic guidance to create ongoing value, efficiency and compliance for the department.

Near-term sustainability and an integrated supply chain transformed the business

“At the onset of the pandemic,” Alawi explained, “the C&P team developed two programmes to support the business:

Programme one was focused on near-term sustainability using price, demand and specification value levers. Significant cost reductions were achieved, providing momentum for further change and improvement.

Programme two concentrated on developing an integrated supply chain by looking at the end-to-end way in which 700 to 800 individual contracts were being managed. These deals were optimised to deliver specific services, but there was an opportunity to aggregate and leverage demand, both across suppliers and within related services.” The C&P team proposed the two programmes to the executive team, with the proviso that success would be dependent on securing their visible support. “A note was quickly issued from top executives outlining the programmes. A critical aspect was that they assigned category portfolios and categories to specific business directors. This created a matrix of responsibilities, with each category owned by a business director and C&P leader,” he said.

“The organisation was facing big challenges and was ready to do whatever it took to overcome them. Rules and boundaries were developed so that the joint teams became empowered, and this became a ‘game changer’ for C&P.”

Communications were issued to business stakeholders at different levels within the organisation. These challenged them with the questions: ‘what can you do?’ and ‘how can you help?’

All spend was reviewed and improvement opportunities were identified. A programme review was held weekly to prioritise which opportunities to pursue, and this approach delivered a high volume of savings.

Collaboration with the business is a category management strategic priority at PDO

Building on the new perception of C&P

An Integrated Supply Chain approach was developed to leverage and extend the benefits secured during the crunch period. This has six levers, one of which is category management.
“Category management is now hardwired into the organisational way of working,” continued Alawi. “C&P leadership team is involved in the five-year strategic planning cycles which are updated on an annual basis across the category portfolio. With early and regular involvement, C&P now has greater influence and ability to maximise value from supplier spend.” Previously, they were only involved when requirements had already been defined by the business.

“The C&P team are being upskilled to build category management competencies so they are ‘at par’ with the technical team. The target outcome is to migrate the 60-strong team from a contract management focus to a category management focus. The change has energised the team who are now much more comfortable to lead category teams and provide constructive challenge to the technical team. The perception has changed so that C&P is now perceived as focusing on overall value, not just cost.

“The joint efforts of the C&P and leadership teams have meant new controls have been introduced to channel demand, prevent fragmentation of spend and encourage the business to become much better planners,” he said. “And a number of strategic metrics have been introduced, including spend covered by a category strategy, and value delivery from each category being managed. We have targeted savings of 7% and this is owned as an objective by the business stakeholder responsible for that category portfolio, rather than C&P. Category results are now reported to the Managing Director of the business.”

C&P leadership has found it very rewarding to see how the team has adapted and delivered a step-change in value from supplier spend. There is now complete buy-in to category management not only from the C&P function but essentially from the business.

Related Expertise

Supplier management

Our supplier management approach combines excellent tools and techniques across the full range of activity, from segmentation, through performance measurement and improvement and through to relationship strategy development.

Category management

Excellence in Category Management gives multipliers of value delivery compared to less effective programs. Our approach, delivers a high performing team and process which provides sustainable value over years rather than months.

Future Purchasing

If you want to get more value out of your procurement spend, or you just want to know more about us, request a callback above or send us an email and we will come straight back to you.

Interview with Simon Mays - At Britvic, category management Is not a choice

Case study

Simon Mays interview – At Britvic, category management Is not a choice

By Future Purchasing |

Sector

HOSPITALITY

Areas of Expertise

CATEGORY MANAGEMENT
BUSINESS PARTNERING

Service

CONSULTANCY

As the Future Purchasing category management report consistently testifies, more and more procurement leaders are putting category management at the heart of a modern, transformational business strategy.

Interview with Simon Mays - Transformation Director at Britvic Soft Drinks Limited

Simon Mays is Transformation Director at Britvic Soft Drinks Limited. He explains how category management came to be the top priority for procurement at Britvic.

“You could say we came from a zero base,” he said, “because we had limited category management in place until a couple of years ago — and now it’s a number-one priority for procurement.

“We ran a series of training programmes several years ago to sew the seed of category management, and this put us in good stead for adoption, but category management wasn’t top of the agenda at the time. It wasn’t until we did the initial scoping for the business case for our procurement transformation programme that we established category management as a key process that was missing.

“In our opinion a good category management approach is pretty fundamental to achieving a function and a team that’s fit for the future — so we knew this was a priority for us. The team was at mixed levels of maturity in terms of training, and the direct and indirect teams were largely operating independently. So investing in that became a priority in order to shift the balance between buyers working on more strategic projects and working on lots of smaller, more tactical, ones.”

Category management has led to good governance

The team had traditionally worked on a 12-month budget cycle, but an annual cycle of discussions meant that by the time they implemented them, it was almost time to start again.

“This meant,” explained Simon, “that each year you are diminishing your ability to change the thinking of the business and make some breakthrough benefits. Using a category management approach was an ideal way to get buyers to develop a three-year plan while implementing a structured technique. This also filled other procurement process gaps such as governance and led to the creation of category and project boards. In essence we turned digital.

“We developed a five-step process with built-in ‘gates’ that formed our governance process. The newly created ‘category board’ and the procurement exec team sign off category strategies in a controlled and structured way. The new process of involving other stakeholders means the efforts of those developing the strategies are recognised and provides opportunities for others who might not fully understand the category to critique the strategy. It’s always beneficial to have outside-in influence — hence the creation of our category board.

From category creation flows the downstream projects.

“Prior to our category management implementation these projects would have had no check against the suppliers being onboarded, nor any challenge to the negotiation strategy being used. So we introduced another step in our strategy by creating a ‘project board.’ This board questions, for example, the auction technique to be used and the category manager considers the options and outcomes from that recommendation. In doing this we have inserted governance from upstream right down to where we make the supplier award.

“Essentially we’ve honed three very important processes: category sign off, negotiation strategy sign off and supplier award sign off — none of which existed before.”

How technology helps

The team introduced an end-to-end spend management solution to help streamline and structure their processes, generate workflows and involve the right people at the right time during the upstream and downstream process. To accompany that they use a strategy-creation tool that sits atop that system to give them full-rounded support, including functionality that allows functions outside of procurement to be involved in developing category strategies. So there’s early involvement in strategies that are not just procurement-led.

“On top of this, a guided-strategy approach helped us energise the team,” said Simon. “Implementing a category management approach required standardising processes as much as possible, but with different skill sets throughout the team we realised we had to retrain, refresh and get 30-plus people to the same skill level.

At Britvic, category management Is not a choice

Bringing technology on board made it more interesting and helped us focus on the key parts of category management that were really going to drive the most benefit. A guided-strategy approach helped us understand the business requirements before going into a project, which was missing before, bringing structure and guiding us to the priorities rather than the whole range of catman tools. We now have a fully auditable and complete workflow cycle that’s brought real visibility: we’ve ditched PowerPoint and Excel and have no varying formats sitting on different laptops, which gives us a higher degree of governance.”

Category management has brought procurement into the conversation

It’s very important for category management strategy to have cross-functional support and engagement from the people working outside of procurement, and in Britvic’s case this led to the procurement voice being heard at senior-level discussions.

“Being a business whose budget discussions focus on materials such as glass, resin, aluminium etc., it wasn’t unusual for procurement’s voice to be absent from that table — it worked rather in isolation,” explained Simon.

“But that’s changing with category management,” he said, “more recognition and a lot more engagement with procurement …through our transformation efforts are making procurement a bit harder to ignore. It helps that we are much more proactive with our communications now and are driving category managers to engage with the business much earlier on.

“We have a cross-functional steering team and have created a procurement council with senior members from supply chain, finance, HR and category management teams. This means updates, progress, procurement strategies, direction and market trends can all be shared and discussed. We have a high-level stakeholder interface to help drive change and an interface with people from the business to do the same there.”

So it’s good to have strong support from the business stakeholders, but in order to get that you must learn to speak the businesses’ language.

“There’s a danger,” he said, “that when we talk about category management we, as procurement professionals, expect everyone else to know what it means. So for example, when building the business case for our spend management platform, part of my role was to engage IT and communicate the benefits it could bring, like project pipelines and hard cash savings, and to understand why we need tech to achieve that. Now that’s hard enough to do, but when you are also selling a guided strategy-creation tool, that’s even harder. The trick is to speak in ‘business plan’ language and not in ‘procurement’ language. And as we’ve started to share category strategies with individuals across the board, it has helped gain a better appreciation that there is a structure and science behind the projects and pipelines we need to produce.”

Measuring category management success

Like many large corporations, the Britvic business strategy 2025 has three top-line objectives: people, planet and performance.

“Using these company guidelines,” said Simon, “we have created our own ‘House of Objectives.’ Among them is the huge area of sustainability, and the progress we are making in that area is fantastic, in fact we have a category management team dedicated to it.

“Our high-level measure for the upstream sourcing process centres on six KPIs. Considering we introduced category management only 8 months ago from a zero base, our progress has been excellent, and the digital approach has undoubtedly helped speed the process We now have around 25% of spend covered by category strategy with an end goal of 85% next year.

“We also have KPIs for the downstream process for the likes of POs and no-touch invoicing. All KPIs are linked to our objectives and we have a Centre of Excellence responsible for measuring them.

“So all in all we have a successful category management approach that is progressing and maturing all the time. But the key is: you need good leadership to make it work and sell it to the wider business. Anyone can develop a process and make people follow it, but you have to generate appetite and motivation around it, and it’s down to the leadership team to get this into people’s objectives. So for us, category management is not a choice, it’s something you know is beneficial to do.”

Matt Swindall, Chief Procurement Officer commented “We are transforming Procurement through our people, better process and technology. By embedding Category Management we are delivering value across a broad range of metrics and building credibility as we lead in contributing to Britvic’s goals and objectives. By investing in our team we help them grow, become more effective and build engagement and recognition.”

Related Expertise

Supplier management

Our supplier management approach combines excellent tools and techniques across the full range of activity, from segmentation, through performance measurement and improvement and through to relationship strategy development.

Category management

Excellence in Category Management gives multipliers of value delivery compared to less effective programs. Our approach, delivers a high performing team and process which provides sustainable value over years rather than months.

Future Purchasing

If you want to get more value out of your procurement spend, or you just want to know more about us, request a callback above or send us an email and we will come straight back to you.

Kerry Underhill Interview - The Ministry of defence is driving acquisition improvements with category management

Case study

Kerry Underhill interview – The Ministry of defence is driving acquisition improvements with category management

By Future Purchasing |

Sector

PUBLIC SECTOR

Areas of Expertise

CATEGORY MANAGEMENT

Service

CONSULTANCY

“Defence is transforming to be modernised, threat-focused and financially sustainable, ready to counter 21st century challenges, lay new foundations for prosperity and seize opportunities for a Global Britain.”

UK Ministry of Defence (MOD) Director General Commercial, Andrew Forzani, described recently how category management – a best-in-class approach, well-established in industry – is delivering transformative benefits across Whitehall and government departments.

There are many compelling and proven reasons why procurement leaders are making category management a strategic priority. To understand the many facets that inform their decision we have been talking with procurement heads in organisations that understand the total-life benefits of pursuing a category management approach.

Kerry Underhill - Head of Category Management, UK MOD

Kerry Underhill is Head of Category Management at the UK MOD. She is charged with enabling category management transformation across the whole of Defence.

Testimony to the importance the MOD assigns to category management is her team’s position within the Acquisition sub-portfolio in Defence Transformation, which crosses all functions, affording it the top-level business sponsorship that a Defence-wide rollout requires.

“Our role is to support each of the defence organisations to see how category management equals resilient capability investment,” she explains. “We’re understanding the ask, setting their policies, developing their processes and facilitating their training.

Operational capability is at the forefront of our minds. Because the MOD is made up of a whole host of organisations that all buy independently, it makes perfect sense to adopt a category approach to make buying as a whole more efficient, but it requires central focus to enable that change across all organisational boundaries. Our aim is to have everyone working together in a one-team approach to purchasing.”

Importance of implementing a category management approach

The MOD sets out in part of its Defence and Security Industrial Strategy how it aims to work more closely and more strategically with industry in the future, how it aims to enhance its productivity and competitiveness, and how it will ensure its acquisition process and Defence programmes generate social value.

“Category management,” says Underhill, “is a compelling mechanism for delivering that. The MOD at the most senior level is invested in category management to reshape procurement across Defence. We have sponsorship from senior military representatives from across the department, so it’s true to say that from Commercial’s perspective category management is very much a priority alongside procurement reform and strategic supplier partnering. They understand the value to capability that better buying opportunities and process efficiencies can bring, so that we can be a better Defence for the future.”

One of the enabling priorities within Acquisition and Transformation is approvals reform. “Savings are the lifeblood of capability investment, of course. But we need to get newer, better to the frontline faster,” says Underhill. “That’s the mission of Category Management. It’s about making a commitment to the morale of Defence personnel by taking an intelligent, progressive and proven approach. As in most large public sector bodies, administration can mean that getting to the front line often takes longer than it should. So, category management will enable that by getting to market quicker and streamlining the approvals process through improved industry engagement and having approved strategies for procurement.”

Ministry of defence

Another enabling priority is looking at how they can take an agile approach and employ technology more effectively. “Traditionally the process of acquisition has been unhelpfully mechanical,” she says. “Category management is helping us to inject pace into our system. Alongside this we have cultural behaviours that we need to influence — Defence has a culture of delegating down the line of command. While this gives more control, it has the opposite effect for category management, as we are trying to encourage a one-team way of working. In this way category management is the commercial contribution to more integrated working across Defence. Whilst it seems like a small part of the big Defence machine, it will build momentum for significant cultural shifts away from parochial operating and moving toward the aspiration of the Defence transformation agenda.”

“The considerations for delivering category management align exactly to the transformation portfolio. It requires interoperability, a multi -disciplinary team, and is not something that can be done in silos. All of this is key for value delivery — getting this right has been recognised as the lynchpin and is why we have such strong support.”

“Delivering value, and savings efficiencies, means we can spend more on capabilities, on skills, on materials, and on the things that matter to the people in Defence. There is a lot of financial and non-financial benefit that can come from a good category management approach. For instance, a ship may sit at port for longer than it should in need of a critical part, but category management can help get that ship back into service quicker through better availability of equipment.”

So, there are challenges and rewards to be had from Category Management …

The biggest challenge is that of scale

This Category Management change exercise is one of the biggest and most complex in Europe — and possibly the world.

The change-enabling team is dealing with very different military organisations – air, land and sea – which all work independently for very good reasons. But that makes collaboration more difficult. The team is working across more than 2000 commercial people (and 20,000 across the broader organisation) with a spend volume over the next four years of about £24 billion, commensurate with what you’d expect of a FTSE top 5. Basically, the size is massive and therefore the scale of the change management programme is equally impressive.

Like any programme of this magnitude and diversity it demands, on a personal level, resilient and strong leadership. Having the ability to influence such a broad array of people who often do not wish to embrace change is a huge challenge.

“Cross-functional working is well embedded in the project teams,” explains Underhill, “and that’s a strength. And when that project is within a category, it works really well. But it’s much more difficult when a category crosses multiple projects. So, we are setting up category steering groups and encouraging key stakeholders to be engaged upfront before we commit to developing a strategy. Clearly this is difficult to do at scale – but is a critical step before we move forward.”

Ministry of defence

How they are tackling these challenges

“The best way to achieve engagement from Defence” says Underhill, “is to employ a military-style approach to conveying category management. We are trying to integrate different parts of Defence and their associated operating models from a military capability standpoint and mesh them with enabling organisations and commercial networks. It’s like docking three very different vessels onto a space station. A multi-domain magic trick.

“We have to communicate to the businesses, in their own language, why this is relevant to them. And this is key, because in Defence we buy everything from pens to tanks, so aligning that extensiveness to category management means we have to understand their needs and be aligned in our vision to ensure we are all heading in the same direction — so adopting language that resonates with everyone is a serious business.

“We have recruited a military person into the team to help with that integration piece: to make sure they understand what we’re talking about and vice versa, and to help map the segments within their projects to categories — because in such a complex and specialised environment messages can get lost in translation. Putting the right people together and embedding someone who understands the language, helping a mutual understanding to grow organically, is another requirement of the enabling team.”

A big part of achieving a common way of thinking is to ensure there is ownership and accountability, both for categories and the businesses. Getting this into their objectives is about investment in people to get them to change their way of working to a whole-team approach. Category management is the new normal for commercial.

“Again, it’s excellent that this drive comes from the top,” she says. “We’ve invested in a comprehensive practitioner-level training package, the tools and templates of which are critical handrails for those who aren’t yet experienced in category management. As we start to be successful and people start to realise the benefits, we start to gain momentum — but it’s important to realise this doesn’t happen overnight. It requires a time investment.

“So, we are happy to say there’s a lot of good progress being made in joining the dots between the different ways of working. We are in the early stages of our category management strategy, but we can already see that by getting the right people talking — the people who are doing the buying talking to the people who are making the demand — realising that they have the same challenges and are actually doing the same thing, they can come up with a common buying profile that is most beneficial to Defence, which has the potential to deliver huge value.”

Ministry of defence

Value is expected to be threefold

“The rewards Defence expects to see from this multi-domain category integration project are threefold,” explains Underhill. “Money, time and interoperability. But getting there means two enablers must happen:

“Once we have embedded this way of thinking into the DNA of Defence to make it a business-as-usual mission, we will see value delivery through the way future acquisitions are carried out. Already we can see pathfinding, visionary work with the Submarine Delivery Agency, Chief of Defence Logistics and Support’s Joint Support Directorate, the Royal Navy’s commercial team and Army Military Capability Delivery Branch. Armed with category management these units are going to start to change Defence.”

“With good commercial people who understand the market, and have the technical expertise to exploit it, category management will enable a through-life view of our purchases. Rather than acquiring goods or services, without considering the costs of other aspects such as support or maintenance, it will give a total-cost perspective, saving time, money and reducing waste.

“This brings us to sustainability,” she continues, “meeting the UK net-zero target is hugely important for us. We have built that into our training tools so that in the formation of our category strategies we are thinking really clearly about how we align them with our Environmental, Social and Governance goals.”

The measurement of success

The team is tracking performance in a way similar to the large corporates of the private sector. Not only are they looking at 10-year savings, as is the traditional stance, they are also looking at in-year savings and total cost. So, the mechanisms and the review process are much more rigorous than you would find in most public sector organisations, as they have ‘routinised’ reporting and review around value — savings delivery, social value and process efficiencies.

“Management of information is absolutely critical to driving delivery,” she says. “Having data at our fingertips is really starting to turn the dial. When I appear before the reporting board each month, I have progress I can actually pinpoint, and when you have ten change programmes going on at once, this is invaluable.

“Category management may not sound glamourous,’ she says, “but it’s the catalyst to immense change, a singular moment for how defence capability is acquired, assured and advantageous from inception to disposal. It’s not just that it’s the right thing to do for financial reinvestment in frontline capability, it’s the right-thing to ensure taxpayer investment delivers the very best equipment, products and services to our nation’s military, wherever they’re called on to serve.”

Related Expertise

Supplier management

Our supplier management approach combines excellent tools and techniques across the full range of activity, from segmentation, through performance measurement and improvement and through to relationship strategy development.

Category management

Excellence in Category Management gives multipliers of value delivery compared to less effective programs. Our approach, delivers a high performing team and process which provides sustainable value over years rather than months.

Future Purchasing

If you want to get more value out of your procurement spend, or you just want to know more about us, request a callback above or send us an email and we will come straight back to you.

Strategising for Net Zero carbon

Blog

Strategising for Net Zero: Integrating Carbon Descent into Category Management

By Mark Hubbard |

The Crucial Role of Category Management in Achieving Net Zero Carbon Goals by 2030

Introduction:

Incorporating a Net Zero Carbon (NZC) strategy into category management is vital for businesses aiming to meet their 2030 environmental goals. This blog explores how organisations can effectively integrate NZC into their category strategies, ensuring a timely and impactful approach towards a sustainable future.

Understanding the Timeframe for NZC Strategy Implementation

The Myth of Instantaneous Transformation

Contrary to popular belief, achieving NZC status by 2030 requires early and strategic planning, rather than an instantaneous shift. Understanding this misconception is key to developing effective NZC strategies.

The Timeline for Implementing NZC Strategies

Businesses should begin their NZC planning by early 2028 to ensure full implementation by 2030. This section breaks down the timeline required for strategy development, contract negotiations, and implementation. Read this Corporate report created by the Environment Agency: reaching net zero by 2030; it’s a good road map for cutting carbon emissions and reaching net zero by 2030 and an easy-to-follow tailored action plan starting now.

Developing a Carbon Descent Plan

net zero carbon

The Importance of Incremental Progress

Rather than a steep transition, a gradual carbon descent plan is more feasible and sustainable. Here, we outline the steps for initiating incremental changes towards the NZC goal.

Incorporating Carbon Descent into Current Strategies

Examine how existing contracts and category management activities in 2024 can influence the 2030 outcomes, emphasising the importance of early action.

Beyond Go-to-Market Activities: A Holistic Approach

Integrating Internal Systems and Processes

NZC goals aren’t just about external contracts. This section discusses the need for internal system developments, process changes, and role adaptations to support NZC initiatives.

Rethinking Category Strategies for NZC

Analysing current strategies’ shortcomings in addressing NZC goals and the necessity for early incorporation of carbon descent plans.

Actionable Tips for Implementing NZC in Category Management

1. Conduct a Comprehensive Review:

  • Examine existing category strategies to identify areas where they align or conflict with NZC objectives.
  • Identify Improvement Areas: Pinpoint specific categories or aspects of your business that need more focus to meet NZC goals.
  • Benchmarking: Compare your current strategies with industry best practices or standards in sustainability to gauge your progress towards NZC.

2. Develop a Detailed Carbon Descent Plan for Each Category

  • Set Specific Goals and Milestones: For each category, outline clear, measurable objectives and timelines for reducing carbon emissions.
  • Integrate Innovative Solutions: Explore and implement sustainable practices, such as renewable energy sources, eco-friendly materials, and waste reduction techniques.
  • Regular Monitoring and Adjustment: Establish a process for regularly reviewing and adjusting the plan to ensure continuous improvement and alignment with evolving NZC standards.

3. Initiate Early Changes and Integrate Them into Existing Contracts

  • Early Implementation of Eco-friendly Practices: Start incorporating sustainable practices in your operations as soon as possible.
  • Revise Current Contracts: Revisit and renegotiate existing contracts to include clauses and criteria that support NZC goals.
  • Educate Suppliers and Partners: Work with your suppliers and partners to ensure they understand and can meet your NZC requirements.

4. Collaborate with Stakeholders for a Unified Approach Towards NZC Goals

  • Engage Internal Teams: Ensure all departments and teams within your organisation understand the NZC goals and their role in achieving them.
  • Partner with External Stakeholders: Work with suppliers, customers, and industry peers to foster a collaborative approach towards sustainability.
  • Stakeholder Communication: Maintain transparent and regular communication with all stakeholders to keep them informed about your NZC initiatives and progress.

Conclusion

Although 2030 may seem distant, immediate action is crucial for achieving NZC targets. Now is the time to re-evaluate and adapt our category strategies to pave the way for a sustainable and carbon-neutral future. For more insights on incorporating NZC strategies into your business model, visit Future Purchasing.


Further reading

Blog post: Driving Incremental Sustainability Through Effective Category Management

About Mark Hubbard

Director

30+ years experience in procurement and supplier management, in line and consulting roles
Previous employment: Positive Purchasing Ltd, SITA,
QP Group, BMW, SWWS, Rover
Education: BSc in Engineering Metallurgy, MBA University of Plymouth
CIPS: Current Member

At AstraZeneca the foundations of CatMan are built on stakeholder engagement

Case study

At AstraZeneca the foundations of category management are built on stakeholder engagement

By Future Purchasing |

Sector

PHARMACEUTICAL & HEALTHCARE

Areas of Expertise

CATEGORY MANAGEMENT
BUSINESS PARTNERING

Service

CONSULTANCY

Organisation T/O

£44 BILLION

Organisation
Geographic Spread

GLOBAL

Procurement Spend

£14 BILLION

As our Global Category Management Study has consistently revealed over the years, stakeholder and business engagement ranks high among the best practices of CPOs who are world leaders in implementing a successful category management approach.

John Dickson, CPO, AstraZeneca

John Dickson, CPO at multinational pharmaceutical and biotechnology company AstraZeneca (AZ), is one such advocate of this best practice.

The scope of John’s function is enterprise-wide and has responsibility for $14bn third-party spend. Having been instrumental in applying successful category management-led strategies while leading procurement at large multinationals including Diageo, Heinz, Rolls-Royce, Network Rail and GSK, he talks from a wealth of experience when he says:

“Category management is not a new concept and has its origins in the late 1980s emanating from the automotive world. Having worked in Procurement for 36 years I grew up utilising the principles of category management and still firmly believe the approach to crafting and executing strategies has to be seen as critical in establishing a best-in-class procurement function. It focuses on identification of business needs, links those needs to an external ecosystem of suppliers and enables procurement to demonstrate a more proactive, strategic outlook in bringing value in all its forms. Given the high proportion of operating costs passing through the function, procurement has a material say in the financial success of a company and a strong category management capability can often directly correlate to the key commercial performance metrics of the organisation.”

A category-driven function has supported AZ throughout its vaccine development cycle

His current company, AZ, has been an integral part of the biopharmaceutical industry’s response to the Covid-19 pandemic. Together with its partners, AZ has released for supply over 2.5 billion doses of its Covid-19 vaccine to more than 170 countries across every continent. Approximately two-thirds of doses have gone to low- and lower-middle-income countries, including more than 260 million doses delivered to 130 countries through the COVAX Facility.

The industry’s response to the Covid-19 pandemic

Syringe

2.5 BILLION DOSES OF COVID 19 VACCIINE

parcel

260 MILLION DOSES DELIVERED TO 130 COUNTRIES THROUGH THE COVAX FACILITY

globe

170 COUNTRIES IN 7 CONTINENTS

“Procurement has supported the business throughout the vaccine development cycle and as a category-based and category-driven function, we have been able to bring external insights to play to drive pace to this critical activity. The complexities of such a programme across R&D, Operations and Commercial business units have been immense and having the end-to-end co-ordination to ensure all elements of the value chain aligned was a critical driver for the function.”

“Working at pace was essential as we had to create new supply chains in order for us to meet the targets of the programme. As a result of the importance we place in category management our knowledge of the supply market enabled us to understand our options externally in establishing the right relationships and, whilst acting quickly, ensured the right level of due diligence was undertaken in assessing full risk profiles of the decisions we made. The fact that the global pandemic presented a truly common goal for us and our external partners was a differentiator to business as usual; everyone knew they had to step in line, make decisions and get engaged – and do it quickly. Category management was definitely instrumental in creating that foundation of understanding and knowledge which enabled us to put into practice a swift external supply solution to the challenge across the programme.”

Category management success requires a particular, business-focused mindset

Drawing on the experiences of the whole vaccine-creation story, John can apply learnings going forward, and pinpoints stakeholder engagement as a priority for procurement.

“Formerly, you would gather your stakeholders into a room and craft a category strategy over an intense and focused period of time – but those days are gone. It’s not easy any more to corral stakeholder groups because business priorities have changed and people are incredibly busy doing more with less. So their motivation to engage in category management has to be managed with consideration. Never more so has it been important for procurement to drive and navigate category management with a mindset grounded in that of the business rather than the mind of the procurement function.”

“Writing your category strategy so that it connects directly with the business is one of the key things I’ve seen evolve over the past few years.

It has become even more important that the limited time you get with the stakeholder community is impactful and the only way to impact those discussions is to talk their language. Procurement needs to generically understand their businesses better, and this is part of the challenge for the function across the board. Procurement needs to work towards closing that gap between being seen as a commercial function that crafts category strategies in isolation to one that is integrated and connected with the business.”

 If you lack strategic insight from a category point of view, driving decisions down through the lifecycle in terms of execution won’t work. So John has worked hard to redefine the guidelines of the process. “It cannot be overly prescriptive,” he says, “because every category is different, and you have a finite amount of resource, so it’s important that the process is flexible and accommodating, otherwise you risk frustrating your stakeholders or your resources burn out – so again, it’s about getting the right balance.

“Additionally, the expectations of procurement employees has shifted with less desire to be slaves to a process. Provide the core toolkit and allow the individuals to exercise their skills and capabilities to craft the relevant strategy for the category circumstance.”

Integrating the strategic and the tactical requires strong and clear interfaces

For me,” says John, “category management is the cornerstone of procurement and has been throughout my career. As procurement evolves over the next three to five years it may change shape and morph into something slightly different, but really understanding your spend, your supplier networks, your business requirements and getting the balance right between all of that will remain critical for us. As we see the advent of more digital solutions to enhance the category management process, the engagement with partners, either internal or external, will allow the function to truly integrate the strategies and their subsequent execution in a much more transparent and aligned way.”
The way that teams use the toolkit of category management is something to constantly monitor. A strategy developed is not something you take down from the shelf and dust off every three years for a spring clean — the tools, the techniques and the thinking should be applied on an ongoing basis for category management to be successful. This is something that was very apparent in the context of meeting the requirements of the past two years with the intensely dynamic and fast changing landscape.”

A number of years ago, AZ Procurement opted to physically separate strategy development from the execution of strategy through the relocation of the sourcing and contracting teams into an offshore captive service centre hub. This was intended to have strategy established in three of the largest core markets and the execution managed out of the shared services hub. “Theoretically that was a good move for a number of reasons,” says John. “But in practice when you physically separate sourcing management from the strategic element of category management, you have introduced the dilemma of how a category manager develops the strategy whilst simultaneously engaging the people who are accountable for executing it when they no longer sit alongside. In the absence of that physical proximity it is imperative that the activities of strategy and execution are not exclusive and isolated from each other but that they interrelate or overlap with distinct and clear roles and responsibilities.”

AstraZeneca Reception

“The accountability for authorship of the strategy needs to be clear yet the construction is not an insulated, one-person activity;

involvement and engagement during strategy development, not just of stakeholders, but of those who have the responsibility of deploying the strategy is essential.”

“There is nothing wrong with driving the strategic element of category management out of focussed, more centralised locations, but you must ensure that visibility of the markets impacted by the strategy are represented in its formation. Without proximity to the markets and the identification of needs that comes from that proximity it is difficult for a category manager to craft a strategy that is fully inclusive of those dispersed markets hence the credibility of the proposition is often undermined.”

As a result, AZ Procurement is pursuing a “network” rather than a “silo” model approach with accountability of the category clear but drawing on a blend of regional and local resources to garner business requirements. These individuals interface with the local business to gather information which is fed to the accountable category manager and then the appropriate number of strategies are formed in conjunction with a deployment plan per market or groups of markets.

The importance of being connected

“Building upon this network approach we have also established a broader engagement offering with our service centre hubs,” explains John. “We have expanded and taken a more regional approach with our global procurement services hub, so we now have hubs placed within regional time zones to facilitate the sourcing and contracting, or execution of the category strategy. This reinforces the need for proximity to the business, to harvest information from our internal stakeholders and also to plan proactively for the best means of executing the category strategy or strategies.”

“I’ve always been a centre-led fan – not a centralised fan,” he adds. “Anything that is located in one location has challenges, albeit it serves some industries better than others. But it makes it more difficult to connect procurement to the business.

The odd phone call or email is not enough, you need to be able to truly connect through a network of people regardless of how they are dispersed. And this breeds an environment where, whatever your role, creating a strategy or executing it, you are all as important as each other because your roles are intertwined.”

Category management is about broader value

The recently launched AZ Procurement Value Proposition has category management at the core. The are called elements rather than pillars or silos as they all interact with each other and rely on each other to maximise the total value brought to the company.

“If you explain your procurement lifecycle approach to internal stakeholders, it’s important to keep it simple. It’s wrong for procurement to assume that they understand, or really care about how you form your strategy, but they will be interested in the outcome of it. An occupational hazard of procurement is often to assume that stakeholders who spend money in their personal lives know how to procure in a complex corporate environment. Whilst frustrating, this is a challenge we should rise above by differentiating ourselves through articulating the breadth of value we consider in our strategies rather than being considered as a one-dimension view of value.”

“For firms that are mostly driven by cost reduction, articulating this broader value has its challenges. Contextually, the last ten years have seen little inflationary headwinds and a lot of focus for the function has been around lower unit costs and to drive competition through clearly articulated strategy and execution. The next decade may be very different and to neglect mitigation of those headwinds is dangerous for the function. In an organisation where re-investment brings true top line benefits the function’s ability to drive budget effectiveness and releasing of funds for other initiatives means the value metric differs from purely bottom line impact. Many new aspects come into play, like sustainability (an essential of all strategies) and risk management (especially post-Covid).”

But how does he make those interfaces succeed, particularly between sourcing and upfront strategy? Procurement’s value proposition is supported by category management.

In addition to a people-focused strategy that underpins their approach, John has four elements to procurement’s value proposition and they all circle back to good category management.

Generating financial value

This is not just reducing cost. Procurement supports an enterprise-wide business and all its enabling functions: R&D, Operations, Commercial, Legal, HR, Finance. “Needs and expectations differ depending on the business unit and its goals,” he says. “For example, in operations you may be tracking every purchase and measuring purchase price variance to improve cost of goods and drive down unit cost. But in R&D, the engine room of the business, a prime motivator is to get more for your budgets so you can reinvest that ‘saving’ or ‘added value’ back into the business. Identification of the specific value(s) that the strategy seeks to pursue is a key component of the category strategy.”

Optimised supplier collaboration

This is even more directly correlated to category management. A real understanding of your supplier network, and not necessarily the incumbent one, means you can see where new opportunities lie. “We should be looking to create new value chains, to explore innovative and creative ways to solve issues from capacity constraints to quality improvements, cost management to risk and sustainability solutions to serve the business and ultimately, in our case, the patients in need of our medicines,” he says.

Achieving Sustainable business

is broader than CO2 emissions and additionally incorporates diversity & inclusion, ethical sourcing, modern slavery as well as risk management of the supplier network. “It’s a whole new world from 20 years ago,” he says. “Regarding emissions, AZ has a truly stretching and ambitious target of being carbon zero by 2025 and carbon negative by 2023 and, accordingly, Scope 3 requires a truly strategic approach which ought to be reflected within the majority, if not all, category management strategies. With Scope 3, the need to assess the profile of our suppliers alignment (tier 1 and beyond) to the corporate ambition out to 2030 needs to be factored into our supplier collaboration discussions and consider financial value implications of the response to the AZ sustainability ambitions.”

Enabling business agility

This focuses on streamlining processes, systems and making the work with procurement and the externally identified and contracted sources more impactful and effective. “Removing bureaucracy should be considered into your category management strategy, along with assurance of supply the level of service effectiveness from the outcome of your strategy should be assessed when selecting a particular source.”

The importance of defining what value means

It’s important that procurement is seen to add value, but does it have the opportunity to drive top-line growth and engage with the business to stimulate revenue?

“We work very closely with finance on this,” explains John. “It’s important to define what we mean by value — in all its senses. As I have said, many firms focus primarily on the bottom line when it comes to assessing procurement performance, but that doesn’t prevent you tracking, measuring, recognising and even rewarding the broader value definitions of budget efficiency, value add and cost avoidance. You will need to have a different type of conversation with your business stakeholders depending on the precise internal audience you are talking to but being clear on how the particular aspect of value impacts that business unit will alter their perception of the broader value story you want to tell.”

“Procurement has had the challenge of sometimes engaging with reluctant stakeholders who see you as a budget stripper and they are defensive of getting you involved as a result. But in an organisation like mine, one purchase is not always comparable to a previous one, so it’s not possible to have a benchmark of how you measure a spend from one year to the next, so you need to identify what the budget holder was prepared to fund for a particular sourced activity before you can articulate a budget efficiency or budget-related saving. That contribution to budget management has value and at that point a decision to reinvest into some other initiative could well provide even greater value to the organisation or business unit.”

In summary

“Category management has evolved and the principles have stood the test of time but all too often procurement has overly focused on the tools in the toolkit, yet the tools themselves mean very little to the business and in some ways this focus has resulted in a negative perception of the function or worse, has given the impression that we do not understand the business well enough,” John believes. “Despite this, the function itself has advanced well beyond needing category management as a process differentiator, as a credibility facilitator or even a function definer. From a reputation point of view the function is much stronger now than when I started my career, thanks in part to the deployment of category management as a focal point and a way of integrating the function into the business from an operational and strategic lens — any CFO will tell you that the vast majority of the cost of running a business flows through procurement.”

“The importance of good category management for procurement will continue in my view but change, aided by technology to access data and intelligence quicker, to make it easier for stakeholders to engage with the strategy simultaneously with its creation and, importantly, to harness the skillset of a different and discerning workforce demographic with diverse expectations of working in procurement.”

“For this reason we are trying to condense our strategy down – and the use of the toolkit behind our strategy is down to the individual.”

“At AZ we employ people to bring their commercial skillsets and insights into procurement. They don’t follow rigid steps, they choose how to bring their category strategies to life for the business. What we do instil, is that category management is constantly evolving. You can never really finish your strategy, because two things will never stop changing: the business environment with its dynamic needs and requirements, and the external supply market with the advent of new vendors, technologies, risk considerations and the emergence of sustainability as a ‘must do.’ “Category management has to be seen as the cornerstone of best-in-class procurement, for all the reasons stated. But it’s not a blueprint. You have to put trust in your people and deploy the toolkit so that its output connects and engages the business.”

Related Expertise

Supplier management

Our supplier management approach combines excellent tools and techniques across the full range of activity, from segmentation, through performance measurement and improvement and through to relationship strategy development.

Category management

Excellence in Category Management gives multipliers of value delivery compared to less effective programs. Our approach, delivers a high performing team and process which provides sustainable value over years rather than months.

Future Purchasing

If you want to get more value out of your procurement spend, or you just want to know more about us, request a callback above or send us an email and we will come straight back to you.

3-Minute Coffee Break Video

Mark Webb and Paras Sood in Conversation About the 2023 Global Category Management Survey

In partnership with Henley Business School.

By Future Purchasing |

future purchasing mark webb managing director

Mark Webb

Managing Director

Profile
22 years procurement experience in line management
and consulting roles.
Previous employment: Price Waterhouse, Mobil Oil and QP Group
Education: BSc in Management Science and MSc in Business by Research, Aston University
CIPS: member

Paras Sood

Paras Sood

Profile
Paras looks after Future Purchasing’s overall strategy and our private sector clients. Paras joined us from Deutsche Bank, where he led strategic procurement transformation globally after a career spanning Life Sciences, FMCG, Manufacturing, Raw Materials and the Public Sector in both industry and consulting roles.

This is episode 1 of our 3-Minute Coffee Break video series on category management in procurement.

Potential of Value Levers

Blog

Unlocking the Potential of Value Levers in Category Strategy

By Mark Hubbard |

When diving into category strategies, a question that frequently emerges is: “Which value levers should we be integrating?”

Here’s a comprehensive exploration of this topic, aimed at both novices and experts in the field.

The Multifaceted Approach to Value Levers

At the very foundation, our answer is straightforward: every single one of them. But let’s delve deeper.

Understanding and Maximising Value Levers

The true essence of a robust category strategy lies in the spectrum of value levers it engages. A holistic approach means we don’t just glance at these levers, we deeply analyse them. Each lever presents an opportunity, even if we’ve previously integrated it. There’s always room for enhancement. Are we harnessing its potential to the fullest? If not, what strategies can amplify its impact?

Some levers might seem irrelevant to a particular category. Here’s where being curious will be beneficial. Challenge the norms by questioning: “What prerequisites are needed to make this value lever relevant?” Such queries can offer insights into areas that might initially appear rigid or unyielding.

Strategic Implementation: Timing and Scale

After identifying potential value levers, the next step is to determine their implementation. Effective category strategies weave in ideas gradually. Recognise that profound change requires meticulous planning, resources, and time. It’s impractical, if not impossible, to roll out all changes simultaneously. Weigh the opportunities to ensure the outcome justifies the effort.

While the allure of ‘Quick Wins’—short-term activities with immediate benefits—is undeniable, they must be approached with caution. Their appeal should not overshadow long-term strategies that might require patience but promise greater rewards.

Beyond Procurement: Embracing Diverse Value Levers

A pivotal realisation for those in the procurement sphere is understanding that category strategies extend beyond just sourcing. True excellence is achieved when strategies tap into a broader range of value levers. This demands profound support from senior procurement teams. It’s crucial to recognise that a category’s highest value might stem from areas unrelated to sourcing.

The challenge, then, is to reshape perceptions. Category management isn’t just a procurement task. There’s a pressing need to foster awareness, particularly among stakeholders and leadership teams. In recent dialogues across various platforms, this perception shift is often highlighted as one of the most pressing challenges.

Which naturally segues to our next focal point: Stakeholder engagement is paramount to optimise the value levers we deploy.

Stakeholder Engagement: A Catalyst for Leveraging Value

Engaging stakeholders doesn’t just facilitate smoother implementation; it’s instrumental in understanding the broader impact of decisions. By fostering a collaborative environment, we can ensure the seamless integration of value levers into category strategies.

Potential of Value Levers

Final Thoughts

The realm of category strategy is expansive, and while value levers play a pivotal role, it’s essential to use them judiciously. I invite you to share your insights: What, in your experience, limits or enhances the application of a diverse set of value levers?

Remember, the journey to mastering category strategy is ongoing, and with every lever we pull, we step closer to unlocking unparalleled value.

Resources:

In the realm of procurement and strategic sourcing, understanding how to optimize value is pivotal. While diving deep into procurement strategies, two resources stand out for their comprehensive insights. Spend Matters sheds light on pivotal aspects in their article Public Spend: A Look at 4 Value Levers for Public Procurement (spendmatters.com). Similarly, the Chartered Institute of Procurement & Supply provides actionable guidance in their piece on Eight ways to create procurement value – Supply Management (cips.org). Both resources offer profound perspectives on deriving maximum benefits from procurement strategies. I encourage enthusiasts and professionals to explore these articles, drawing inspiration and insights for a holistic approach to sourcing excellence or simply contact us to understand more.


Further reading

Blog post: How well are value levers used

About Mark Hubbard

Director

30+ years experience in procurement and supplier management, in line and consulting roles
Previous employment: Positive Purchasing Ltd, SITA,
QP Group, BMW, SWWS, Rover
Education: BSc in Engineering Metallurgy, MBA University of Plymouth
CIPS: Current Member