Category Management – The future of Higher Education procurement?
Building a high-performance procurement function in Higher Education is not without its challenges;
- Budgets are often highly devolved to departments and faculties,
- The culture is generally “softer” – focusing on people rather than commercials
- Spend can often be fragmented across multiple contracts and suppliers having been contracted on a requirement-by-requirement basis
- Whilst academic stakeholders have significant influence, decision making is often consensus-based
- Requirements must be procured according to public sector procurement regulation
Our experience from working with clients in the Higher Education sector is that stakeholder engagement is the critical-success factor. Without it, even the best commercial initiatives are doomed to implementation failure.
However, in transforming their procurement functions, a growing number of Universities have begun implementing Category Management as their approach and core process for procurement. With its focus on stakeholder engagement, demand challenge and supplier-led innovation Category Management is ideally suited to this sector.
What is Category Management?
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.
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.
Change isn’t straightforward, takes time and may need external support to make it happen, but the results are worthwhile.
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
If you would like to discuss transforming your procurement function, please call: +44 (0)203 693 7275 or click here to email usClick here to read the full article