Summary

UK defence procurement is under pressure, and the supply chains that underpin national capability are paying the price.

This blog sets out six procurement challenges facing the sector, from fragile global supply networks to critical skills shortages and fragmented category strategies. We make the case for stronger, more mature procurement practices as an essential step towards building a more resilient defence supply chain.

The UK defence sector is operating under unprecedented pressure from increasing geopolitical instability and growing, but more focussed defence budgets. Last year, the Strategy Defence Review and Defence Industrial Strategy set out challenging expectations across the industrial base.

The UK government is yet to release its widely anticipated Defence Investment Plan, mindful that the previous government and the MOD had allocated £288.6bn on equipment procurement and support over the next decade. However, successive governments and the MOD have struggled to translate this budget into the delivery of key capabilities within agreed costs and timescales. This pressure is not unique to the UK. NATO member states are having similar conversations about defence capability, industrial readiness, and procurement reform.

The supply chains that underpin UK defence were built for a different era. They now need to adapt quickly to a very fast-changing geopolitical environment. This demands bold, coordinated transformation if they are going to respond effectively.

All participants must act now to strengthen resilience across the defence supply chain. This requires a high degree of strategic procurement maturity and sustained collaboration across all tiers of the supply chain. The transformation process starts with each supplier assessing their own maturity and capabilities and building a clear summary of their strengths and weaknesses. Building a shared picture of where we stand today allows us to collectively agree and prioritise the actions to achieve the transformation required.

6 Key defence supply chain challenges and how to solve them

1. Globally distributed and dependent supply chains

The UK defence supply chain is deeply embedded in global supply chains that evolved in an era of free trade and interconnected markets. Only certain areas of the supply chain had any focus on national sovereignty, security or resilience. For decades, the logic was straightforward: source from the suppliers and regions that deliver the best value. But in an era of geopolitical instability, conflicts and systemic global instability, that logic has become a liability.

These factors represent significant risks to defence capabilities. Surging demand for components, combined with shortages and disruption to critical minerals, electronics, or specialist manufacturing impacts the ability to scale up production. Without intervention, the UK risks becoming strategically dependent on overseas suppliers, and supply chains possibly controlled by our adversaries.

What needs to change

• Defence organisations must take a genuinely strategic approach to supply chain design, critically designing their supply chains to mitigate the risks. That means mapping the supply chains and identifying risks, dependencies and opportunities to re-shore or friend-shore key capabilities.
• Industry needs to work collaboratively with MOD and their partners, through the Defence Industry Joint Council and through MOD category leads to identify the scale of defence requirements and develop strategic stockholding policies for critical materials, equipment and components. This is not a one-off exercise, but a sustained endeavour that is critical to building national strategic capability and assets.
• The defence primes need to integrate defence SMEs into their supply chain networks and actively support them to be mature and resilient. The Defence Industrial Strategy points in this direction, and procurement functions need to follow through, treating SME integration as a strategic priority.

2. Supply chain capability to scale at pace

The defence supply chain has evolved for peacetime to deliver steadily, predictably, and within tightly managed cost parameters driven by fiscal pressure and limited Defence spending. However, the commercial frameworks and procurement strategies currently governing procurement are not fit for a world where the ability to scale at pace, and deliver combat mass could be the difference between success and defeat.

Few organisations have robustly assessed their suppliers’ capability to significantly surge capacity and production when required. They do not understand the associated costs, or the lead times and the rates of scaling possible. Importantly, this assessment should evaluate the ability to scale across all tiers of the supply chain and the time taken to qualify an alternative source of supply. This is a critical defence risk; without embedded capacity and surge planning within supply chain strategies and design, the sector will not be able to respond at the pace and scale required.

What needs to change

• Defence organisations need to design category strategies that address surge capacity through supply chain design. They must assess suppliers and their sub-tiers for their ability to scale production, identifying and mapping opportunities for dual-use technologies and capabilities. The cost, time and qualification implications of these options should be clearly modelled to inform decision-making.
• War-gaming must become a core procurement capability to deliver collaborative scenario planning with key suppliers and their supply chains. For critical supply chains, supplier and sub-supplier business continuity and contingency plans need to be regularly reviewed and tested, not filed away.
• Better coordinated planning between MOD and defence sector for high-cost enablers such as common test facilities. The planning needs to identify where there are significant costs to be funded by MOD to accelerate delivering scale efficiently, with reduced duplication and more managed risk.
• Treat scalability and flexibility as a core commercial principle to be built into commercial agreements from the outset. This will give suppliers the confidence to plan and respond to changing delivery profiles, surging capacity, changing volumes and rapid reprioritisation. The supply chain ecosystem can respond at a pace to meet the changes in demand and manage the risks for resilient supply.

3. Critical skills shortages

A growing skills gap across engineering, advanced manufacturing, cyber and digital fields is constraining the sector’s collective ability to address every challenge. An ageing workforce, specialist defence capabilities such as welding, a limited STEM pipelines of talent, and fierce competition for specialist skilled workers from more attractive sectors are all factors. These issues are making it harder for both defence organisations and their suppliers to scale production and deliver critical national security capability. A recent defence industry survey found that 67% of respondents believed that workforce and skills shortages will significantly impact business growth opportunities. Currently there are at least 10,000 stated vacancies across organisations participating in the survey.

This is not simply a workforce problem. It is a supply chain and procurement problem. Without the right skills and capacity at every tier of the supply chain, developing resilience becomes impossible. Strategies that look strong on paper will fail in execution if the skilled people needed to deliver them are not in place.

What needs to change

• A coordinated, sector-wide approach to defence supply chain skills. No single organisation can solve this alone. Investments in apprenticeships, technical training, and STEM talent pipelines are essential. This must be treated as a shared responsibility across the ecosystem and not left to individual organisations to resolve on their own.
• Larger primes to take a lead role, actively supporting their Tier 2 and Tier 3 suppliers in accessing talent pipelines, rather than competing against them for the same scarce resource.
• Closer collaboration between industry, government, and academia. This is the only way to build the critical capabilities the sector so urgently needs at the scale and pace required.

4. Lack of visibility down the supply chain

Most defence organisations have a clear understanding of their Tier 1 suppliers. However, below that, understanding and visibility drops sharply, and the dependencies, vulnerabilities, and pinch points within the deeper supply ecosystem remain largely unknown. Procurement decisions are being made without the full picture – which leads to unmanaged risks and issues.

Without multi-tiered supply chain visibility, organisations cannot identify vulnerabilities, bottlenecks, or hidden dependencies. Their ability to predict, gain early indication of potential disruption and ultimately proactively manage and mitigate disruption effectively and efficiently is severely limited.

What needs to change

• Defence organisations must invest in structured supply chain mapping and risk intelligence capabilities that extend well beyond Tier 1 to manage their supply chain risk.
• MOD suppliers must cooperate in providing supply chain visibility and submit it into its intelligence platform Supply Chain Resilience Improvement Performance Intelligence Tool (SCRIPT). This enables MOD to identify and assess the broader risks across different supply chains and understand the aggregate risk position and enacting mitigations through the supply chain team.
• Defence primes need to build multi-tiered visibility, identifying critical nodes and monitoring supply chain risk at every level. This needs to become a core capability across the defence supply chain ecosystem. Organisations that can demonstrate visibility and effective risk management across their supply chains will be far more likely to win, retain and grow business within the defence sector.

5. Financial support to scale

Even where the procurement intent is strong, and the strategies are sound, there is a fundamental barrier. Many suppliers, particularly SMEs, do not have the capital necessary to invest in the new scale capacity, tooling, and facilities capability and workforce expansion needed to meet growing defence demand. Without financial mechanisms to support scaling, suppliers cannot participate fully in future programmes, however well-designed the procurement approach around them.

What needs to change

• The sector needs to explore targeted financial mechanisms that actively support supply chain scaling, including long-term contracting frameworks, co-investment models, and government-backed financing schemes that give suppliers the confidence to invest in new capacity.
• The sector needs to implement practical financial measures such as faster payment terms and government-backed finance. This can make an immediate and tangible difference to smaller suppliers trying to scale production. Reducing financial barriers for suppliers is not a peripheral concern; it is a prerequisite for building the resilient supply chains the sector needs.

6. Lack of aligned category strategies across the supply chain

Defence procurement does not operate in a vacuum. Yet, the category strategies, where they exist, rarely reflect the full complexity of the supply chain ecosystem. These strategies typically stop at Tier 1, leaving limited or no consideration of the critical subsystems, assemblies, components or raw materials on which the categories depend. Each organisation develops its own strategies, in isolation, without visibility of what others are doing or failing to align around shared priorities.

In highly competitive or constrained sectors, this fragmentation is costly. Organisations duplicate effort, compete for the same scarce resources, drive up costs, and fail to secure the long-term supply relationships that resilience requires. The potential leverage of a coordinated approach remains unrealised. Without coordinated and aligned category strategies cutting through the multi tier supply chain ecosystem, vulnerability is effectively built into the industrial base.

Category strategies in MOD are not just a procurement tool, they are collaborative business strategies aligning and cohering stakeholder requirements. They harness deep supply market expertise, research, facts and data to drive innovation and enhanced military capabilities through more resilient supply chains. This enables MOD to move at pace whilst delivering value for money to taxpayers.

What needs to change

• Organisations must build and retain deep market expertise that strengthens their own category strategies for critical equipment, infrastructure, goods and services.
• Category strategies need to be developed with stakeholders to identify real user needs, both now and into the future. These can include potential surge capacity, alternative solutions, sovereign capabilities and supply chain risk scenarios focusing on broader business value levers and not just demand, price and cost.
• Industry needs to then come together with MOD and wider UK government to develop collaborative category strategies across critical supply chains. This will align government, primes and key suppliers around shared priorities for critical materials, components, technologies and skills. From here, we can form networks to securely share common data and insights and take coordinated action across supply networks.
• Investment in the procurement function is key. Its maturity and expertise helps aligns the ecosystem at every level. Organisations that have not yet built strong category management capability and deep market expertise cannot contribute meaningfully to the collective effort. It is therefore an imperative that organisations understand their existing strategic procurement capability and areas that need strengthening.

The role of Procurement in strengthening the Defence Supply Chain

The six challenges span structural barriers, financial constraints, and capability gaps. But in each case, the route to a solution runs through procurement. The sector cannot build stronger supply chains without first building stronger procurement capability.

Procurement determines which suppliers enter the defence supply chain ecosystem. They determine the suppliers’ level of the involvement, visibility and capacity to scale operations efficiently. When procurement is reactive and transactional, the supply chain can become fragile and fragmented. When procurement is strategic and mature, it becomes the mechanism through which supply chain capability and resilience is built, sustained and continually improved. It is world class.

Two capabilities are central to this:

• Category management creates the coherence, visibility, strategic direction, and supplier relationships that makes the supply chain resilient.
• Supplier management ensures that the relationships underpinning critical supplies are actively developed, monitored, and protected beyond Tier 1.

These are not back-office functions. They are core to delivering national defence capability. Neither capability can deliver at the scale the sector needs without procurement maturity, deep experience and expertise to underpin it. Where maturity is uneven or inconsistent across the supply chain ecosystem, weak links emerge, and the whole supply chain suffers. Building expertise and processes consistently, across every tier, is where the work must start.

How Future Purchasing can help

Addressing these challenges requires more than good intent. It requires procurement as a core organisational competence which is deliberately built, embedded and sustained. Success looks like a procurement team that has the capability and toolkits, coupled with the experience to consistently act on them.

Future Purchasing has a long history of working with the MOD, Tier 1, and Tier 2 suppliers on procurement transformation, category management, and supplier management programmes. We understand the complexity, challenges and constraints of the defence sector, and we know what strong, successful procurement practice looks like at every level of the supply chain.

We bring more than 20+ years of practical client experience across over 350 client procurement and supply chain transformation projects delivered across complex public and private sector organisations. We have 250,000+ data points from our Global Category Management Report and ongoing research. That depth of expertise and insight means we can benchmark your organisation’s current position, identify and prioritise the gaps, and build and support delivery of a practical and realistic roadmap. We work alongside your teams to support implementation, bringing proven cross sector best practice and practical delivery capability to help turn strategy into measurable, sustained outcomes.

Our Procurement Maturity Assessment gives defence leaders a clear, evidence-based view of where their organisation stands today. From there, we can work with you to build the category management and supplier management capabilities that translate procurement strategy into supply chain strength.

Are you ready to build a more resilient defence supply chain? Take the Future Purchasing Procurement Maturity Assessment and get a clear picture of where your organisation stands and what needs to happen next.

The answer is simple: the same way they did before Large Language Models (LLMs) technology arrived.

There is no statistical correlation between the availability of digital Category Management solutions and the strategic capability of a Procurement team (we are currently researching this question in the Global Category Management Survey, participate here).

On the contrary, implementing tools without training on the strategic tools in CatMan platforms has resulted in low adoption and opportunity identification – creating frustration in category managers and their leaders.

And while LLMs are quick at offering opinions and lengthy texts for building category strategies, they lead to inconsistency across categories and neglect the fundamentals that 23 years of experience in designing and implementing connected strategic tools has proven to be essential.

If you want to improve your strategic approach to managing spend, join us for an interactive discussion on what Strategic Procurement actually means, the frameworks, tools, processes, and templates of the Track8 Strategic Procurement Toolkit, and how to drive governance in strategy development and execution.

There are no shortcuts to being strategic. A consistent framework makes sure you get there without losing focus or value along the way.

The speakers:

In the 2024 edition of the Global Category Management Report, we asked whether sustainability has become a specific category management objective alongside financial and risk objectives.

Theory and practice diverge on sustainability in Category Management

The response was both encouraging and surprising, as 68% of respondents either agreed or strongly agreed with this finding. Our own in-client experience indicates that incorporating strong sustainability targets into category strategies is still in its early stages.

Typically, the owner of the sustainability targets is a key stakeholder. A category manager needs to articulate these requirements in their category strategy. This activity is part of building the business requirements with stakeholders, which is still challenging for most category teams.

Government-led sustainability targets can pose a pressing challenge for category strategies due to the time required to develop and implement them. If the scale of change is substantial for a category, the owner may need to take immediate action to meet the sustainability targets.

Embedding sustainability across the Category Management Operating Model

Despite recent retractions, Environmental Sustainability and Governmental (ESG) practices, along with Diversity, Equity, and Inclusion (DEI), will increasingly become core topics within Procurement. Category Management can drive embedding and accelerating a company’s ambitions by integrating objectives and requirements into category strategies.

As with other areas, embedding sustainability across all six dimensions of the Operating Model Framework is key to a successful implementation. Contact us to discuss how we help procurement teams design operating models that successfully balance the interdependencies between each dimension.

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Further reading

Blog post: Driving incremental sustainability

Thousands of survey responses over 12 years paint a clear picture: Soft skills like business partnering and storytelling are the biggest make-or-break factors for procurement team effectiveness and successful Category Management implementations.

Yet many organisations still struggle to grasp which skills are critical or how to develop them systematically.

Watch our practical 60-minute panel discussion with soft skill coach Alison Smith from Future Purchasing, capability leader Neno Predrovich of Teva Pharmaceuticals, and Procurement recruitment specialist Angharad from Zero9.

Moderated by Fabian Lampe of Advance Procurement, we’ll explore why behavioural skills have moved from “nice-to-have” to essential, and what procurement excellence and capability leaders need to do about it.

You’ll learn:

• Real insights into what makes procurement professionals truly effective in today’s business environment
• Which skills are dominating job descriptions today and tomorrow
• The most important soft skills for Procurement
• Practical strategies for developing these skills yourself or in your teams
• Whether you’re interested in designing learning & development programs or simply trying to ensure your relevance in a tech-driven environment, this session will give you actionable insights and steps you can implement immediately..

The speakers:

What is a Procurement Strategy Hierarchy?

A hierarchy of strategies ensures a clear alignment between the organisation’s overarching vision and goals and the procurement team’s strategy, as well as the agreed-upon actions taken at each level. This article outlines how a hierarchy of strategies helps create clarity and alignment across the organisation.

The Procurement Strategy Hierarchy describes a cascading model of strategies. Each underlying strategy layer is derived from and aligned with the superior strategy layer to ensure a clear connection between an organisational strategy and the actions of each individual within the organisation. Starting from the organisational and business strategy, the procurement strategy needs to be designed to support the business objectives.

The Category Management strategy and operating model need to translate those objectives into processes and mechanisms to ensure alignment across categories. Ultimately, category strategies need to be created based on the aligned business requirements. This model can be further developed into supplier management and sourcing and negotiation strategies.

Using the Procurement Operating Model to create a strategy hierarchy

The Global Category Management Report and its six dimensions provide a checklist of questions to shape a strategy and operating model for Category Management. This fits into the middle tier of the strategy hierarchy and clarifies for the procurement team and stakeholders how category management will be adopted. The procurement leadership team collectively makes these decisions.

Looking upwards in the hierarchy, the category management strategy and operating model are a subset of the wider procurement strategy and operating model, which is itself shaped by the overall organisational and business strategies. 

Looking downwards, the spend influenced by the procurement team is divided into manageable categories, often reflecting supply markets or internal structures. 

Strategic Alignment in Procurement

These are the category groups that senior managers control through an approach we call strategic alignment. Strategic alignment is a distinct activity above category and supplier management. It is used during the business planning cycle to identify and prioritise procurement activities with senior business stakeholders and consider linkages and interdependencies between categories and suppliers in the category group. The outcome is an agreed-upon pipeline of category and supplier projects to work on. Individual category strategies sit beneath strategic alignment.

Benefits of a clearly designed Procurement Strategy Hierarchy

Ensuring alignment between the overarching vision and goals of an organization and translating them into the procurement team’s strategy, ultimately breaking them down into category, supplier, and negotiation strategies, creates cohesion across the actions taken at each level by every team member. This clarity helps everyone within the organization understand how their work contributes to overall procurement and business objectives.

When this hierarchy is well designed and communicated, category strategies are co-created with stakeholders, fully supported, and implemented at speed. Responsibilities at each level are clear, resulting in improved value delivery, risk management, and agility.

Assessing Your Category Management Maturity

We offer the Category Management Maturity Assessment to assess the alignment of your category management practices and the performance of the individual steps. Contact us to discuss the ingredients of a strong operating model and how to build one.

The skills required to succeed in procurement are evolving more rapidly than ever before. While foundational expertise in category, supplier, and contract management and sourcing remains important, it is no longer enough on its own. Today’s procurement professionals face a dynamic mix of rising business expectations, evolving regulatory demands, and rapid technological change, especially with the emergence of AI and digital tools.

At the same time, organisations are under increasing pressure to do more with fewer resources. With tight headcounts and a competitive talent market, leaders can’t simply hire their way to a future-ready team. Instead, the focus has shifted to reskilling and upskilling existing talent.

Skills frameworks and assessments are essential tools in this journey. They help identify skill gaps, unify diverse teams, and focus development efforts where they matter most. This blog explains what skills frameworks are, why they’re important, how skills assessments work in practice, and what benefits they offer.

What is a skills framework and why do you need one?

A skills framework is a structured outline of the key capabilities required in procurement roles, with clear descriptors of what proficiency looks like at each level. Procurement teams are rarely made up of individuals with identical backgrounds, training, or experience. A skills framework creates a shared language and aligns expectations, allowing individuals and teams to honestly assess their current skills and identify development priorities. With growing complexity in areas like ESG, risk, and digital transformation, a skills framework enables targeted learning that aligns with organisational strategy.

How to create a skills framework for Procurement

Creating a robust skills framework starts with clarity. You need clear, unambiguous descriptors for each skill mapped to specific job roles within your organisation to ensure expectations are fair and relevant for each individual. Vague or compound descriptors can lead to confusion and inconsistent self-assessments that fail to provide meaningful insights.

Established models, such as those from the CIPS (Chartered Institute of Procurement & Supply) and IFPSM (International Federation of Purchasing and Supply Management), offer strong starting points. These can be customised and expanded to reflect your organisation’s specific needs, strategic priorities, and cultural context.

Key skills to include

Many procurement skills frameworks focus heavily on technical and digital skills, but tend to ignore the importance of soft skills. Our 2024 Global Category Management Report identified stakeholder engagement and alignment as the primary barrier to success in category management and procurement. And with the advancement of technology, these skills become more important than ever.

A well-rounded skills framework should include a blend of foundational procurement skills (like category management, contracting, or negotiation), behavioural competencies (including stakeholder engagement, adaptability, and communication), and digital capabilities (such as data analysis and AI tool proficiency).

Adapting when competencies change

Procurement skills are not static — they evolve in response to the environment in which we operate. While many core competencies remain relevant over time, new requirements inevitably emerge due to changing business priorities and technological advancements. It’s essential to periodically review and refresh your skills framework to ensure it remains fit for purpose.

Skills assessments explained

Skills assessments measure individual proficiency against the defined framework, providing a clear picture of strengths and gaps. Common approaches include:

• Self-assessment: Individuals rate themselves against each defined skill using the framework’s descriptors. This method is easy to implement but may be influenced by differing interpretations or personal bias.
• Manager assessment: Line managers assess team members based on observed performance. While more objective, this is limited to the manager’s direct experience with the individual and may not capture the full picture.
• Moderated assessments: A blend of self and manager assessments, where results are calibrated through manager-led or external moderation to improve consistency and reduce subjectivity.
• 360-degree feedback: Collecting input from peers, direct reports, and other stakeholders. This holistic view offers richer insight, especially for soft skills and cross-functional collaboration.

Skills assessments should be completed at regular intervals. By re-evaluating individuals and teams regularly, you can track progress, measure the impact of development efforts, and adjust learning plans as needs evolve. This ongoing cycle of assessment and improvement supports individual growth and helps organisations build more capable, adaptable procurement functions.

Skills assessments are often supported by digital platforms, which simplify distribution, data capture, and analysis. Digital tools also enable rapid reporting across individuals, roles, regions, or business units, highlighting both common skill gaps and standout capabilities. One of the most valuable outcomes of skills assessments is their ability to reveal hidden talent — skills within teams that haven’t yet been fully utilised.

Benefits and challenges of skills assessments

The benefits of a skills assessment

A well-designed skills assessment delivers value at both the individual and organisational level. Key benefits include:

• Strategic alignment: By selecting the right set of competencies, assessments help ensure that procurement capabilities are aligned with broader business strategy, positioning the function to better support organisational goals.
• Career development: With a clear view of current capabilities, organisations can design meaningful development pathways, identify high-potential talent, and build robust succession plans.
• Consistency: Assessments create a shared language and a consistent benchmark for evaluating skills across teams, functions, and geographies.
• Smarter project resourcing: Understanding who has what skills enables better project matching (putting the right people on the right initiatives).
• Prioritised Learning: With visibility into strengths and gaps, leaders can more confidently focus training investments on the most critical skills gaps.

Potential challenges

While the benefits are compelling, skills assessments inevitably face challenges. Recognising them — and tackling them proactively — can help ensure success. Common challenges include:

• Resistance to participation: In some regions or cultures, assessments may be met with scepticism or concern. Framing the process as part of organisational development is key to gaining trust.
• Leadership buy-in: Leadership plays a critical role in setting the tone. If leaders don’t champion the initiative or allocate time for it, uptake will be limited. Clear communication about the strategic value of the assessment is essential.
• Misaligned or generic frameworks: If the skills framework doesn’t reflect the unique context of your organisation, it may cause confusion or disengagement. Tailoring the framework to your specific roles, goals, and maturity level is crucial.
• Lack of visible outcomes: For individuals and managers to fully engage, they need to see tangible results from the effort. Linking the assessment to development plans, promotions, or measurable improvements helps demonstrate its value and build momentum.

Putting it into practice with Future Purchasing

Understanding the skills your procurement team requires — and assessing current capabilities — is the first step to building a high-performing, future-ready function.

At Future Purchasing, we support organisations in designing and delivering skill profiles and assessments that provide clear, actionable insight into current competency levels. Our Compass Skills Assessment tool gives you a consistent and objective view of individual and team performance across key procurement capabilities, enabling you to identify strengths, surface hidden talent, and target development where it matters most.

But we don’t stop at diagnosis. Based on assessment results and aligned to your strategic goals, we help design tailored learning and development programs that close capability gaps and accelerate progress. Whether you’re aiming to raise the bar across the function or deepen expertise in specific areas, our approach ensures training is relevant, role-specific, and impactful.

By combining structured assessment with targeted upskilling, we help procurement teams unlock their potential and deliver measurable value, both now and in the future.

Ready to get started?

If you don’t have a skills framework aligned with your organisational structure and job roles yet, now is the time to act. Get in touch to discuss your current setup and how Future Purchasing’s Compass Skills Assessment and tailored learning programs can help you build a robust foundation for long-term performance.

Kongsberg maturity assessment

Rob Anthony talks to Mark Webb and Matt Jones about how the Future Purchasing Maturity Assessment has improved the value category management brings to KONGSBERG

The speakers:

Transcript

Mark Webb
Hi, Rob. Thanks for joining us today. We work with you recently. Really enjoyed it. Looking at the Catman maturity within Kongsberg. And we’ve got a few questions we wanted to ask you about the approach and the value in the team that you and the team got from it. So. Well, firstly, would you like to tell us a little bit about yourself and Kongsberg?

Rob Anthony
Thanks, Mark. Pleasure to be here. My name is Rob Anthony. I’ve worked in supply chain for over 26 years. I did 20 years with Rolls-Royce Aerospace and Marine and then, six years ago, I moved over to Kongsberg when Kongsberg acquired Rolls-Royce marine. And I’ve been working in Kongsberg maritime, but also with the group. My role since then, my career has mainly been in supply chain, but procurement, logistics and planning. And to talk a bit about Kongsberg. So Kongsberg means kings Mountain. Khong is king, Berg is mountain. It’s a company that’s actually existed since 1814, actually created when Norway got its first constitution and has a strong defense business. Historically as well. And then since oil was formed, has increasingly a strong maritime business. And with the acquisition of Rolls-Royce marine six years ago, maritime is the biggest business with defense also a very, very strong, business. We also have two other business areas in the company, one called Kongsberg Discovery, which is about discovering the ocean, subsea, capabilities, and surveillance. And we also have a smaller, digital business. So as a company, it is a Norwegian company, with locations in 40 countries, just over 14,000 employees and just, nearly, 50 billion NOK in revenue. So quite exciting business, across defense, maritime businesses globally.

Mark Webb
Right. And how is supply chain set up with maritime.

Rob Anthony
Yeah. So I can talk about supply chain just as a, as a group level and then about maritime. So, Kongsberg has quite a small, headquarters. So, group responsibilities are sitting within the different business, what we call business areas. I’m responsible for group indirect and group supply chain activity, sitting within the maritime business. And as an example, the CIO for it actually sits within defense business. So we have different roles sitting in the different business areas. But within those strong, business areas with a very small headquarters, we have divisions. Divisions are organized by group products and systems. And, you know, and then within those divisions, we have business units that are also aligned by product, family and, PNL and we really are focused on having a product line structure. So how, focused on our customers. So how is supply chain set up? Well, the majority of our supply chain businesses actually sit within those divisions and business units, close to the sites. And, and also in the regions around the world, particularly USA, Americas, EMEA and Asia. But we also have a smaller central team, covering, shared services, process tools and capabilities and areas that we’ve agreed will be, will be better when, when centrally. As part of that, we also have a team not just in Norway, but, you know, around the world, but we also have a team, a shared service office for supply chain that we’ve established in Krakow. We established that when we involved voice and we’ve continue with that, and we now have over 60 people, supporting multiple businesses, across Kongsberg, on supply chain and procurement.

Mark Webb
Excellent. Yeah. So I was wondering, Rob, how long have you guys been doing category management for.

Rob Anthony
Yeah. Thank you. That’s a that’s a good question. So, we actually in business marine, set up strategic procurement from, from around, 2011. And we’ve been really deploying strategic procurement and category management since then. So about, 14, 15 years, it’s been a journey, in our maritime business, there was a very strong growth period until around 2015, when there was, a downturn. And actually now we’re seeing maritime is also in a growth period. So obviously category management has different priorities when you’re in a growth or in a, in a downturn. Obviously, we’re still focused on the key areas, but maybe, maybe with different priorities. So, strategic procurement has continued since then. We have some of our, people have been, category managers and working in strategic procurement for that time frame. So we have some as a good level of experience, but we also have new technologies and also new regions that we’re covering that we need to be ready for our main challenges right now, being ready for the growth, making sure we’ve got enough capability and capacity around the world. And also skill sets that we have skills and capability to manage those, those categories.

Matt Jones
Hi, Rob. I was just going to I mean, you started to talk about it anyway, but I was going to just ask you a question about, you know, the opportunity you feel there is in category management. We’ve met a lot of your team and we’ve, we’ve been talking to you for a while and understand that you’re good in many areas of category management, but just what do you think the opportunity is now to go from good to great?

Rob Anthony
Yes. Thank you. Thank you for the question. So, we we’ve been doing category management for a while and strategic procurement and, you know, quality, cost delivery. We feel that we’re delivering, a good level, a reasonable level of cost savings every year. We’ve got good sourcing plans. We’ve got a reasonable level of contract coverage. We have good supplier engagement. So that’s fine. You know, we don’t need to do anything else. But if you take a step back and you say, actually, we’re capturing the full strategic value that we could put to strategic procurement and management. That is a question. And do we need to look at things, with an independent view to sort of test where we are, compare ourselves with, competitors or with other good industrial benchmarks and say, okay, we might be doing, as you said, a good job, but are we doing a great job? And how can we actually, understand what that gap might be. So really, the reason, that, we worked with Future Purchasing and we decided to take a look at category management was, was more around opportunity, you know, what more opportunities there. How can we maximize the strategic value? And the reality is that 95% of people in supply chain are working on operations or working on deliveries for this year. So how do we uplift and how do we think about capturing our strategic value and also thinking about risk management? At its 2013 up to 2035,

Matt Jones
Great. I was going to just say, you know, we worked with you for a really rapid sort of maturity assessment and, I was just interested to see how you felt. We as a team worked with your team and just maybe you can share some insights in terms of the approach and what you felt was of value.

Rob Anthony

Yeah. So we kicked off a piece of work with future purchasing. We actually worked with you before, I think about 8 or 10 years ago. And we knew each other, and we stayed in contact, and we felt now was the right time to do it, to do a benchmark. What we were looking for was an independent assessment, and also more of an advisory engagement where you, you come in, we work together, you do some kind of holistic, evaluation with some industry benchmarks. We can have a good engagement discussion about that, and then we can, you know, build that into our strategy for the future. So that was the, that was the goal. Working with future purchasing went very well. I think you’re very open. I think we have a good sounding board discussion. One very important point is your listening, which we appreciate because one of the challenges when you’re doing benchmarks is, fixed views on applicability, which may be different on the industry. So, getting a tailored benchmark that can fit with the industry while still bringing in the benchmarks and challenging yourself is is important. And when we talk particularly about maritime, maritime doesn’t fit easily into the benchmarks. You know, when you look at the drop down menus on these, there’s maritime is never on there, you know? So aerospace, transportation, industrial, equipment. So getting, we found it hard in the past to get good tailored benchmarks for maritime. So that’s, we definitely found it very useful engaging with future purchasing and fitting the benchmarks with our business.

Matt Jones
So one of the things, observations I have, is we spoke to you about in a series of questions that we would we’ve asked the industry over many years and how they would, how you’d score yourself or your team score themselves. But also you asked us to tailor some of the questions specifically to, to your business.

Rob Anthony
Yes, we did. And, we appreciate that. And we also, agreed to do interviews rather than, a survey by email. That is we do a lot of surveys. Also, really getting that 1 to 1 engagement through interviews. People open up a bit more, and, and also in Norway and maybe pass the Norwegian culture in the company. The importance of dialog is very important. And what they talk about is direct dialog. So you actually speak 1 to 1 with someone and you have direct dialog on and, on the topic. And you allowed air to breathe. Have time to sort of talk about it, without rushing the conversation. So having, 1 to 1 interviews with enough time really allow people to open up, and pull that information through, and lastly, actually get them engaged, because if you interview people and then you start to do an improvement program, people feel connected because they’ve already given their input.

Mark Webb
And, Rob, how did you find the six dimension approach that, we used? Because, that was pretty fundamental to the approach.

Rob Anthony
And so I think it’s actually behind you on the wall, in the six aspects. So, you know, we can see the different aspects that we looked at. And the reason we found this very positive was bringing in a different aspects. So we’re looking we’re open minded, we look at different areas. Maybe we hadn’t thought about, I’m looking at your chart behind you, but we have, process and technology, stakeholder engagement, capability and mindset, organization structure, different areas. Maybe we hadn’t thought about, and then focusing not just on cost for the value.

Matt Jones
That’s really good. And I suppose just to finish, you know, we’ve worked with you on the maturity assessment. You’ve got some insights, you, you’ve started to do something with those insights. What next in terms of how you taking forward the, the value that you found from the exercise?

Rob Anthony
Yeah. So we’re actually taking, strategic we’re putting a strategic improvement plan together, taking into account the feedback from future purchasing, but our own, we actually had a full on workshop after our engagement with each purchasing in terms of also getting the feedback directly from the team. And then we’re going to be building that into, into our improvement, strategic improvement program for cash management and strategic procurement moving forward. We’re already getting good questions from the business. You know, what is the strategy for 2035? How are we going to manage risk management in the future? How will we I think the phrase is being is future proof. How are we able to take advantage of the opportunities but also have the flexibility to cope with the global risks that are out there at the moment? And the dynamics that we see, that take us on, on its growth path. So we’re going to be looking at all those aspects also looking at digitalization and how can we also do things in more efficiently as well and more effectively? So we’re going to look at all those aspects and build that into the plan. We have some milestones coming up. So we actually have Global supply conference in, in October. We’re going to try to, be able to share the framework a little bit also with our strategic suppliers, when we have that event. So we’re not going to rush it. We’re already delivering. So we’re going to continue delivering, but we’re going to try to really build that plan. And then work out which priority areas we want to do first.

Matt Jones
Great. Then we’ve reached the end of this interview. I think, Mark, you maybe have one last question and then we’ll try and wrap up.

Mark Webb
Yeah. We just you know, the one key takeaway you would say, Rob, from your engagement with us over the last few months now.

Rob Anthony
Thank you. Mark. So my one, if there’s one key takeaway from this activity, our, president, Lisa, she has introduced a value for us to consider in the company last year, which we’re continuing with, which is being curious or staying curious, curiosity. So what does that mean? What that means? As a value, that means that you’re open minded, you’re open to new ideas, you’re willing to look at new ideas, you’re open to feedback. And that’s something that we’re trying to bring through a whole business and is very relevant to what we’ve done with future purchasing. So staying curious is, is my big, takeaway at the end.

Mark Webb
Excellent. Well, hopefully all of the ideas that the maturity assessment threw out, which was, was a heck of a lot, which hopefully we distill down quite neatly. But yeah, there was a lot of curiosity from the teams on how they could improve for sure. Thank you. Thank you all. Thanks. Appreciate it.

The 2024 Global Category Management Report is an assessment of the current state of Category Management in Procurement. But instead of just comparing the current state to the past, it also aims to anticipate future challenges and priorities. Therefore, we included a question asking participants to identify their greatest challenge for category management in the future. This article summarizes the findings.

Stakeholder engagement, alignment, and understanding remain the central challenge for category managers.

31% of participants identified the primary challenge to succeeding with Category Management as how stakeholders get involved in the development of category strategies. This includes how to create better alignment with stakeholder priorities, develop their understanding of category management as a business approach, and build engagement during the strategy development process.

While freeing up time in stakeholders’ schedules and creating a better understanding and appreciation of the importance of Category Management is important and noble, ensuring that category managers make effective use of the available time is vital for the success of Procurement. Equipping them with the necessary soft skills for effective stakeholder engagement, communication, and storytelling is crucial for unlocking business requirements and crafting convincing narratives for their strategies. The Category Management toolkit should include tools that facilitate stakeholder identification, mapping, and communication management to ensure consistent application.

Resource availability and skills undermine the best intentions

For 17% of participants, the necessary skills to drive effective category management are a significant issue. Additionally, 5% of participants confirmed that their category managers did not always have the time and space to apply their skills appropriately within a category environment.

It takes significant effort and time, including appropriate training and coaching, to develop the skills necessary for applying category management effectively. With increasing challenges finding and retaining talent, this investment might not be sustainable, especially as knowledge often remains in individuals’ heads or desktops. Investing in capabilities that support knowledge management is, therefore, an important step for securing this investment.

Risk and macroeconomic factors are an evergreen challenge

9.5% of participants identified the pressures exerted by increased supply chain risk and macroeconomic factors, such as inflation, supply shortages, and workforce disruption, as important challenges that need to be addressed through Category Management. This speaks to the diversion of resources into combatting not just short-term but also more structural issues within broader economies.

To ensure that risk analysis is not limited to isolated status assessments as part of category strategies, supplier and supply chain risks must be associated with clear risk mitigation strategies. A centralised initiative management capability can help create a holistic view of potential risks and ensure that risk mitigation activities can be tracked.

Limited category management process leads to limited results

Notably, 6.5% of participants cited a lack of or a limited category management process as their greatest challenge. This may indicate a lack of genuine understanding of category management and what it takes to make it work successfully.

Our experience suggests that a proper operating model is often lacking, with limited support for category managers and limited leadership and governance. Designing an operating model that puts category management at the centre and aligns its different dimensions will ensure an end-to-end process with clear processes, tools, and roles and responsibilities, unlocking the value of Category Management.

No culture for category management means a cultural change is needed

A similar-sized group of 6.5% of participants noted that their organisation was not well-positioned to adopt a strategic category management approach to acquiring goods and services. This was caused by a lack of understanding of how it might work, too much focus on other areas of procurement, and a lack of senior management understanding of how category management could add value.

To understand this challenge, we must fully analyse the expectations, current practices, and opportunities offered by Category Management. A maturity assessment will allow us to identify the reasons, potential opportunities, and a clear roadmap towards the desired end state.

Data, technology, automation, and AI – a cry for help

The advent of AI is transforming the overall business landscape, and many respondents mention a lack of digital tools, data availability and quality, process automation, and the use of AI as both a potential opportunity and a challenge for their success in category management.

Investing in technology to support spending and data analytics, market intelligence, category strategy development, initiative management, and sourcing execution is a significant demand for any organization. It is crucial to identify the most pressing challenges and pinpoint capabilities that can address multiple pain points while seamlessly integrating into the broader technology ecosystem to build a compelling case for technology investments.

What’s next: influencing the future of Category Management

Each of these challenges can be addressed through a range of interventions, ranging from targeted and ambulant approaches to broad and intrusive ones. Regardless, success and sustainability are more likely when a well-thought-out category management improvement plan is in place, outlining the necessary steps toward achieving category management excellence.

With over 20 years of experience in Category Management and more than 100 client engagements, we have acquired extensive expertise in this field. We are confident that our work on operating model design, our proprietary toolkit, and transformation support can help you establish a solid foundation in Category Management and address future challenges. Please reach out to discuss our maturity assessment and how we customise our approach to meet your unique requirements.

Further reading:

Blog: How to accelerate your Category Management adoption

From our research, it is clear that many organisations still see category management as simply another term for strategic sourcing. However, we believe that category management and strategic sourcing focus on different aspects and have distinct goals.

What is category management in procurement

Category management is the process of organising spend into groups of related products and services according to their characteristics, market dynamics, or business objectives. It is a strategic end-to-end process for buying goods and services that aligns business goals and customer requirements with supply market capability and maximises long-term value for the organisation.

It is a cross-functional activity that requires organisations to work collaboratively to understand internal stakeholder needs and examine category spend, the supply market, and suppliers to identify opportunities for savings and value improvement as well as aligning your procurement strategy with your business goals.

Category management helps build long-term relationships with suppliers and leverages their expertise and innovation. It is a way to manage categories for their whole life-cycle, and it sits above procurement activities, such as strategic sourcing, Supplier Relationship Management, or Contract Lifecycle Management. Category strategy outputs fit into four areas — sourcing, SRM, contracting, and internal operational change and implementation.

What is strategic sourcing

Strategic sourcing is a procurement process used to source goods and services from the available supply market at a specific point in time. It is aimed at selecting the right suppliers to achieve the lowest cost while meeting the specifications and required timelines. Its primary goal is to achieve price/cost reduction via aggregation and consolidation through negotiations. The process includes evaluating third-party requirements, analysing current spend, identifying potential suppliers, developing the route to market strategy including single/multi suppliers, lotting strategies, etc., and then running a supplier selection process or RFP and negotiating contracts. It is an effective way to deliver sustainable cost savings and promote healthy market competition between suppliers. It is often an output from a category strategy.

Category management vs. strategic sourcing – subtle differences, big implications

While many steps and processes are similar across Category Management and Strategic Sourcing, there are some subtle differences that with significant implications on how both are applied.

i. Strategic sourcing is focused on price reduction. Category management is focused on broader business value, such as risk, revenue, innovation, and cost, which may also include buying less (e.g., demand management) or buying smarter (e.g., specification management).

ii. Strategic sourcing is a procurement process focused on “sourcing events” for selecting suppliers that requires limited business input outside of specifying the requirements.

Category management on the other hand is an enduring cross-functional business process that requires intensive collaboration with a broad set of business stakeholders to develop deep insights on internal business requirements to create and implement wide ranging strategies to enable the organisation to behave as an intelligent customer in “what it buys”.

iii. Strategic sourcing provides a good understanding of the external market at a specific point in time and helps the organisation to be good at “how it buys”. Category management delivers deep external market expertise around the product structure, supply chains, the supplier landscape, and regulatory and risk factors.

iv. Category management delivers deep internal and external market expertise, cohering stakeholders, and providing governance to enable the organisation to behave as an intelligent customer in “what it buys”. Strategic sourcing alone provides a good understanding of the external market at a point in time and helps the organisation to be good at “how it buys”.

v. Strategic sourcing is usually focused on solving a specific demand and negotiating respective contracts with a timeframe of 1-3 years. Category management determines the go to market and approach for an entire category, which can span multiple events, and focuses on cohering stakeholders (demand), and providing governance to steer the organisation in a defined direction over a 3-5 year horizon.

Combining Category Management and Strategic Sourcing to execute strategies for increased value

In summary, category management and strategic sourcing should not exist in isolation. Category management provides the business intelligence and governance to maximise business value and, when combined with strategic sourcing, enables you to execute the procurement aspects effectively — so you are good at both what you buy and how you buy it.

Where organisations focus on one over the other, they often either end up with category strategies that struggle during implementation or with disconnected approaches for the same goods and services across regions, countries, or business units. Developing an Operating Model that clearly acknowledges and defines processes, roles and responsibilities, and handover points will ensure that organisations achieve the best of both methodologies and create increased customer value. This will become even more important with the advancement of digital tools and AI in both areas and the advancement of data-driven procurement.

If you want to discuss how your organisation is performing and how to design an operating model for seamless best-in-class processes, please speak to us about our maturity assessment.