5 Reasons Why You Should Invest In Category Management

Posted 25/01/2018

Findings from our 2016/17 category management survey ?

1. Category management - remains a top 3 priority for more than 70% of procurement teams
  • However, only 5% of respondents report that they are doing it well. So there is considerable opportunity to deliver additional value from category management – for both leaders and followers.
2. Procurement Maturity - only 28% of Procurement teams are mature in category management
  • For many organisations the focus is still on RFPs and negotiation - engaging stakeholders and working collaboratively with them to unlock the value available from each category is a running theme in our report. Creating compelling category management strategies is a key factor.
3. Top 19 Category Management Best Practices – accounts for 68% of CM value
  • From our category management survey results, the top 19 best practices accounted for 68% of category management value which in turn equated to 15% of company financial performance. So the direct impact of category management on company performance should encourage a serious focus on improving category management performance.
  • The opportunity for improvement in category management is confirmed by the fact that, on average, these top practices are implemented by only 58% of leaders and 36% of followers.
4. Stakeholder Collaboration – Procurement need to increase collaboration with stakeholders
  • Leaders have made good progress in connecting category management to their organisation’s broader strategic objectives.
  • In contrast, both leaders and followers fail to secure sufficient time from stakeholders for category management. This restricts the ability of procurement to work with technical stakeholders to identify and validate all available value improvement opportunities for a category – resulting in missed opportunities.
  • In the few organisations where category management is optimised, it is often considered a business, rather than functional, process and this reinforces the need for stakeholder time commitment.
5. Savings Potential for Leaders and Followers:
  • The survey shows that leaders achieve higher savings rates than followers from their category management projects - 11.1% compared to 7.7%. Yet, even leaders recognise they are missing opportunities and leaving value on the table – a further potential 5.2% by their own estimates.
  • Leaders also have a higher proportion of their spend covered by category strategies - 64%, compared with 34% for followers. The survey results demonstrate that a third of leaders are achieving greater than 75% category strategy spend coverage and a potential target of 80% is reasonable.
  • Figure 1 shows the combined impact of savings rates and strategy spend coverage for followers, leaders and the full potential. It also includes the total savings achieved at each of the three levels per €1 million spend. Followers achieving the potential will boost their current savings performance by 400%, compared with an 83% performance boost for leaders achieving the full potential.

Tagged by topic: Category Management , Category Management Survey

  by Allison Ford-Langstaff

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