Benchmarking your category management performance

“If the process isn’t seen as one way of working it will explicitly damage Category Management performance.“

Identifying performance by industry sector

Further analysis of our 2012-13 Category Management Survey data by Professor Marc Day of Henley Business School has identified how category management performance varies by industry sector.

Step 1 involved us reviewing the 70+ survey questions and identifying those that were indicators of performance. Eight were selected, covering key topics such as stakeholder support, category strategy quality, spend covered by strategies and savings levels achieved etc.

Step 2 required each of the 200+ respondents answers to the eight questions to be consolidated and summary performance scores created.  These scores were converted into performance categories of Basic, Improving Embedded & Optimised.

Step 3 focused on consolidating the scores by industry sector.

Interpreting the results

We have ranked sector performance according to the median results and the top three sectors are Media, Oil and Pharmaceuticals. The bottom three are Construction, Technology and Banking. 12 of the 13 sectors have median Category Management performance that is either Basic or Improving –  confirming that Category Management is still in its infancy.

Using this data it is now possible to benchmark an organisation’s Category Management performance versus industry peers.

The 7 priority best practices that drive category management performance

Survey respondents had identified that current savings delivery rates could be increased by 25-85% if Category Management was optimised. Given this massive opportunity, we also worked with Professor Day to establish which Category Management practices had the strongest impact on performance. The 7 questions with strong correlation were (in rank order):

1. To what extent is Category Management seen by your organisation as the core “one way of working” for Procurement practice?
   Recommendation: make all spend go through category management and reinforce its usage.
2. To what extent is Category Management aligned and connected to your organisation’s broader goals?
   Recommendation: make explicit linkage between the Category Management strategy and business/functional strategies and plans.
3. To what extent are the activities in your Category Management process mandatory? Recommendation: make key activities and tools mandatory.
4. To what extent has Category Management been fully embedded in your organisation with clear, unambiguous roles and responsibilities for Procurement and for the stakeholders? Recommendation: clearly define roles and responsibilities in RACI format at a granular level.
5. How do you rate the capability of your organisation’s Category Management process to help identify improvement / savings opportunities?
   Recommendation: ensure that your process is easy to use, motivating, attractive, flexible and focused on identifying improvement opportunities.
6. How do you rate the ability of the Category Managers in your organisation to apply the Category Management process.
   Recommendation: educate the procurement team in how to use the process flexibly and hire people that understand and value the difference between category management and traditional sourcing.
7. Do Category Managers and Stakeholders have formal objectives for Category Management? Recommendation: Ensure category managers, sponsors and cross-functional team members have specific objectives for Category Management.