Category Management – the answer to the University Challenge?
Category management within higher education
If you were to ask many higher education organisations where they were on the procurement maturity curve, the answers would probably not be very positive.
Student expectations have risen rapidly and continue to rise, driving an increasing need for improved facilities, new technology and all with a fundamental requirement for the highest ethical and sustainability standards.
It seems odd that in a country where we have 3 of the top 5 universities in the world, their procurement set up does not mirror their educational prowess.
It’s clear that universities in general are behind other sectors in terms of advanced procurement, but what is being done about it and what can be done differently in future?
The current situation
HEFCE stipulates that universities and colleges should ensure that 30 per cent of their addressable spend (in areas other than staff pay) should be under effective procurement management within the next five years. This all sounds logical – but for many Universities, reaching the starting point still seems like some way off:
Head of Procurement at Top 35 UK University.
We currently don't have line item data as invoices are still placed manually into the system. We currently don't raise POs and the product coding is too high level. The key for us is to just get that data in the first instance - before we are able to transform processes and systems.
This statement speaks for itself. Those targets are a long way off if the data isn’t even in good enough condition to identify where savings can be made.
Tackling the issue can deliver very interesting dividends.
The University of Sheffield recently drove out an additional £4.4m in savings by creating visibility of all non-pay spend and implementing a new category management approach to procurement.
Category Management - the answer to the University Challenge?
There is a very dry definition of procurement category management: the practice of segmenting the main areas of spend into discrete groups of products and services according to both their function and, crucially, how the supply markets are organised.
In real terms, the key difference is in fundamentally changing the entire procurement perspective; from reacting to a specific stakeholder requirement in order to tender it and put a compliant contract in place, to considering all an organisation’s spend in a particular supply-market category and developing a strategy and workplan to proactively source, address and manage it.
It could be the difference between, for example, putting in place a contract for fume cupboard repair in one faculty, to understanding the complete requirements for laboratory equipment maintenance across the University and working out a strategy with all the stakeholders for proactive and reactive maintenance, warranty and replacement.
Where it really works in this sector (as well as other soft culture sectors) is in the focus on stakeholder engagement before (as well as throughout) the procurement process. This helps to not only obtain buy-in to the outcomes but also builds-in demand challenge so that the organisation buys only what it really needs (not just wants!) in the first place.
The Benefits of Category Management
- Step-change in savings delivery
- Delivers savings across entire category, not just specific requirements
- Engages stakeholders, ensuring business requirements are fully considered
- Builds in demand challenge through stakeholder engagement
- Focuses on the supply-market, actively encouraging innovation and value-add
- Results in improvements to service levels, quality, availability and value for money
- Reduces risk in the supply-chain
- Cross-functional team approach ensures buy-in to outcomes
- Raises profile of procurement as a “service-partner”
Of course, it isn’t a case of arriving on a Monday morning and declaring a new way of working. Moving from requirements-based tendering to category management is a transformational change. It not only affects what people do but, fundamentally, how they do it. For a procurement function this can mean moving from an ethos of back-office support to internal consultancy or “service-partner” as well as supporting the change with process, methodology and tools.
Head of Procurement, world Top 100 University.
Change isn't straightforward, takes time and may need external support to make it happen, but the results are worthwhile.
A two to three-year programme of change is not unusual and investment in resources and tools is likely. The most successful implementations start by introducing category management to a small number of straightforward categories and then rolling-it out as the process becomes established both in the procurement team and the organisation.
As organisations move to Category Management they will drive out savings. Therefore the financial case for change is strong and an assessment of the future benefits can be made in order to build a business case.
With the challenges arriving in the Higher Education sector, there is a growing case that Category Management will become the future model for procurement.
Points to consider:
- Category Management is particularly effective where the need for stakeholder engagement is high – we consider it well suited to the Higher Education sector
- Benefits go far beyond just savings; it can be the driver for innovation, risk reduction and in improvements to service levels, quality, availability and value for money
- It is a “new way of working” – change shouldn’t be underestimated
- Building a financial business case provides a strong mandate for change