The most direct, powerful way to transform procurement performance - a straightforward guide

Posted 20/11/2013

The most direct, powerful way to transform procurement performance – a straightforward guide

FP’s category management study reveals the shocking scale of opportunity that most companies are missing. One of the most important findings is that three quarters of companies can increase annual savings by 83% by properly implementing category management.

So… what is Category Management?

Category management is a strategic end to end process for buying. It aligns business goals, customer requirements and supply market capability. Activities include Category Planning, Sourcing and Supplier Management. When done properly, it transforms long term value, reduces cost, reduces risk, improves service and improves revenue.

Why research category management?

From our work over the years, we have seen that if a company wants to dramatically improve procurement (and business) results, getting category management right is without question the most direct and powerful way to do so. However, we’ve also seen that most companies don’t fully understand how cat man really works, what benefits it can bring, or how to implement it.

We surveyed over 300 global companies to collect detailed, structured and insightful information about their cat man practices. The average company surveyed has an average procurement team size of 70, an average spend of €650m and achieve average savings of 4.6%.

By collecting real data from a representative and statistically significant group of companies, the aim of our research was to quantify:

  • Whether Category Management really makes a difference to procurement performance, and if so, by how much
  • The Category Management principles that deliver maximum impact
  • The practical lessons that “follower” organisations can learn from leading performers’ experiences

The results

When we analysed our research, even we were shocked at the scale of opportunity that most companies are missing. The research shows that for most companies, even moderate improvements to category management can significantly raise performance, while a thorough implementation can deliver dramatic and game changing improvements.

In fact, by properly implementing cat man, three quarters of companies (followers) can increase annual savings by 83%.  But a big surprise was that even Leaders admit they can further improve their cat man activities. We measured that specific further improvements would raise Leaders’ performance by an additional 25%.

The report defines and codifies the best cat man practices that until now have been elusive to all but the highest performing companies. Most valuable of all is that every section contains practical recommendations for the reader which are based on evidence from the research. Both followers and leaders can now clearly understand how to improve performance in the most effective way.

How you can use the information

Click here to download: Category Management Survey .

A number of people have asked us to benchmark their company’s category management and provide a bespoke detailed roadmap for improvement. We can extend this offer to all readers by visiting our page on category management benchmark and diagnostic services .

Tell us what you think

Please add your comments below. We are happy to talk you through the key learnings, and some supplementary analysis done with Henley Business School.

Finally please let us know if you would like to participate in our next round of research.

Tagged by topic: Category Management Survey

  by Paul Radziwilll

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