Has twenty years of category management been a mixed blessing for Procurement?
The term was borrowed from retailing where, from the late 1980s, categories such as bakery, cleaning products and toiletries were run as mini-businesses. Buyers who had only savings targets were replaced by category managers with turnover and profitability objectives. The intention was to develop business through closer collaboration with suppliers. Over thirty years however, that gave way to buyer-leverage.
Procurement category management did not take as long. When first introduced in the late 1990s, Category Managers were supposed to command a view of key supply chains, research external environments, and contribute to corporate strategy.
It was a beautiful idea but not easy for consultants to sell to firms for whom savings was a key performance indicator (KPI) or even their primary goal. It was not long before category management was about leveraging price reductions through volume aggregation. The category management mantra of early engagement with internal clients was still heard, but not practised. As my colleague, Ron, senior category manager in a global pharmaceutical, company put it:
“Early engagement is a waste of time: schmoozing with internal clients; supporting activities that don’t lead to a purchase; and spending months on projects that previously took days. And” he went on, now showing some emotion, “when I’ve done that, all the crappy, overpriced proposals that were the reference points for reporting savings have gone!
“I report more hard-savings by turning up after there is a problem, not by being there to avoid it!”
If your company is serious about doing procurement category management properly, should it first remove hard savings from Procurement’s key performance indicators?