Sourcing and Procurement’s Untapped Potential: Leveraging Category Management

In the today’s economy, companies must balance the constant pressure to reduce costs with their strategic visions to achieve high performance. Progressive companies understand that procurement has a role to play because it can help reduce costs significantly and, properly structured, can support the attainment of the enterprise’s broader goals.

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Category management can help, aligning procurement activities with overarching business goals to deliver both long- and short-term benefits without disrupting business operations and supplier relationships. Accenture’s research, Outsourcing and Procurement Mastery, identifies high performance in category management as one of the key characteristics of procurement masters.

Clear identification of business needs is the cornerstone of successful, integrated category management, making high levels of savings possible and opening the door to better services, access to innovation and improved quality. Category management can then go beyond the merely transactional to deliver longer-term business benefits.

Category managers and business stakeholders need to collaborate on multiple levels to deliver optimal benefits from marketing programs. A high-performance business will employ different category management approaches for procuring different products and services. Take Web hosting and print services for example. These types of services are usually commoditized and low in value and therefore can be approached on cost management basis. On the other hand, agency creative or media planning services add considerable value and are based on relationships and specialized knowledge.

Take Web hosting and print services for example. These types of services are usually commoditized and low in value and therefore can be approached on a cost management basis. On the other hand, agency creative or media planning services add considerable value and are based on relationships and specialized knowledge.

To develop a tailored, segmented approach for different categories or subcategories, category managers must actively collaborate with both internal stakeholders and suppliers to consider the full business environment—externally as well as internally. Outsourcing such functions can be extremely valuable because it allows companies to benefit from the vast reservoirs of knowledge collected by category managers, and can help build better long-term relationships with suppliers.

This role is particularly important during tough times, when supplier risk is higher than usual. Accenture’s procurement research and experience shows that procurement masters with good supplier relationships achieve savings of 5 percent from both sourcing and post-contract activities as opposed to the 3 percent that non-masters achieve.

Accenture’s Outsourcing and Procurement Mastery study further shows a link between outsourcing and procurement mastery. Procurement masters tend to outsource more than other companies—and achieve savings that are 39 percent higher. And category management is a key component of high performance in procurement.