Value Impact – Why is it important?

Value impact is the end result produced by the category management activities and programme.

It is typically assessed through a range of fundamental metrics such as level of spend penetration, cost reduction and cost-avoidance savings.

However, there are many other important outputs achieved through category management including supplier performance improvement, reduced levels of risk, better supplier service levels and increased revenues. This is how category management will ultimately be measured by the business.

The importance of value impact

Category management is a means to an end and it is critical that there is clarity on the expected deliverables. Leading organisations encourage the sharing of category management objectives between procurement and business stakeholders. They embed these objectives in their functional strategy and performance scorecard. This gives them:

• Direction to guide their activities and drive desired behaviours and levels of performance.
• An ability to link category management activity to business objectives and measure levels of contribution and alignment.
• An ability to assess relative performance over time and identify areas of strength, weakness and opportunity.
• An ability to assess relative performance by category, geography or functional area.

What our global category management survey tells us about value impact

In summary

The overall score for value impact across all respondents has increased from 37% to 38% compared with the 2019-20 survey.

The highest score was Q6.7 at 65% asking how many respondents can evidence maximised use of risk reduction value levers. In comparison, cost reduction score was 58%. The higher score for risk may be a result of the need to deal with supply chain problems caused by Covid-19. Managing supply chain risk became the prime issue to fix rather than cost.

The lowest score was for Q6.1 at 24% which was about excellent quality category strategies. However, it should be pointed out that leaders and improvers improved their scores in this area whereas starters decreased to 9%. Leaders outperform starters by 11:1 in this area.

Key recommendations

Leaders v Starters performance gap