Category Management

Transformational Change in Public & Private Sector Procurement Operations

Advances in technology, changes in service delivery models, and increased competition are forcing public and private procurement
organizations to reconsider the way they source goods and services for their businesses. Procurement organizations now place greater
emphasis on agility and flexibility when making purchasing decisions with the goal of operating as a professional enterprise with an
in-depth understanding of the buyers and suppliers in their value chain. This shift in priorities requires a new operating model that
improves the integration of the sourcing process with other key business processes and separates strategic and tactical activities within
the acquisition lifecycle.
Category management presents a proven framework for
transforming procurement operations to increase the value the
department provides to its organization. It is a process-based,
data-driven approach to sourcing that focuses on the majority
of spend on products and services from third-party providers to
reduce cost, improve organizational performance, and add value.
As a best practice, category management provides a strong foun-
dation for creating strategically focused procurement departments
with more effective operations designed to achieve significant cost
savings, gain process efficiencies, and enhance staff competencies
and productivity. The true value of category management is much Data gathered from the spend analysis allowed us to create
more complex than aggregating spend data and strategic sourcing detailed contract comparison matrices that mapped govern-
efforts. When implemented fully, category management covers a ment-wide solutions to each category, identifying the largest
full range of procurement tactics, including demand and supplier vendors, and relevant contract details, such as duration, program
management, that enhance the value procurement departments and acquisition points of contact, and scope of product and
contribute to the overall organization. service offerings. This step also involves developing category
plans for each category that have a vision for strengthening or
Grant Thorntons approach to category management first building partnerships with their customers and suppliers.
requires assessing the current acquisition organization, defining a
category hierarchy and boundaries, and mapping them to available The third step in our approach involves executing category plans
spend data. Category hierarchy and boundaries ensure that the to prioritize customer and supplier capture opportunities as
procurement organization is receiving a complete, yet segmented key accounts and to begin documenting and sharing results to
spend and market analysis that will allow for strong visibility of build a better understanding of the category solutions landscape.
dynamics and performance by category. Based on market intelligence, the category plans establish the
foundation for the more focused, future operations by identifying
The next step involves conducting spend analysis of the catego- key initiatives to improve the services procurement provides.
rys market by collecting, normalizing, and cleansing spend data by
category based on the category hierarchy. This provides enterprise
visibility to the normally fragmented spending of the organiza-
tion, allowing the procurement organization to easily view what
it is buying, from whom it is buying, and what it is paying. At the
Office of Integrated Technology Services at the General Services
Administration, Grant Thornton produced a category hierarchy
that bundled IT products and services into categories and subcat-
egories with an associated product and service code taxonomy to
assess spend data. Based on this hierarchy and available data, our
team also created a spend analysis process and delivered spend
analysis reports for each category that identified contract vehicle
utilization, customer and supplier concentration, and related
market trends. We also used visualization software to automate
time-consuming data cleansing and consolidation processes and to
create dashboards that displayed the spend analysis results to help
the category managers understand the market and key influencers.
These initiatives may include creation of new sourcing solutions,
consolidation of overlapping vehicles, aggregation of common
requirements, and targeted stakeholder engagement. Category
initiatives may also demonstrate the need for redesigned business
processes and functions that focus organizational resources on
value-added activities, including supplier management, account
management, and workforce development.
Finally, developing a performance management system to capture
data on key measures is critical to assess whether the desired
outcomes are achieved and making any necessary adjustment
or recalibrations. Under a category management model, metrics
tracking stakeholder engagement, such as buyer and supplier
satisfaction, and buying behavior, including spend under manage-
ment, become more important to illustrate category maturity and
the success of implementation.
While the acquisition lifecycle itself does not change when
implementing a category management, the combined use of data
analytics, market research, category planning, account manage-
ment, supplier management, and performance management result
in the program and procurement acting as a business enterprise
that can leverage data to improve its workforce, enable innovation
and collaboration, and consolidate common requirements. Cat-
egory management forces procurement organizations to imple-
ment a business methodology using a disciplined set of functions
to more efficiently leverage its total spend, effectively identify
best-value procurement sources for the goods and services they
buy, and strategically manage the ongoing customer and supplier
relationships. However well-intentioned, the procurement and
program organization must be committed to change by:
1. Articulating a vision for future operations create a
common understanding among stakeholders
Grant Thornton has supported the following public and private sector clients in implementing a category management operating model:
For more information on the topics covered in this publication, please contact Grant Thorntons Global Public Sector through www.
GrantThornton.com/publicsector:
Eric Heffernan, Principal Shiva Verma, Principal
T 703-637-2769 T 703-373-8740
E Eric.Heffernan@us.gt.com E Shiva.Verma @us.gt.com
2. Instituting data-driven decision-making using analytics
and research to drive improvements
3. Driving innovation through collaboration establishing
clear roles and responsibilities that centralize mission execu-
tion and foster communication through cross-functional teams
4. Developing a skilled workforce building the competency
and skill set to execute category management techniques
and tools
5. Measuring performance Capture, refine, and make
continuous improvements
When implemented correctly, category management accomplishes
the following:
Improved transparency, knowledge, and management of
spend data and market trends
Consolidated programs, contracts, and supplies that achieve
government-wide savings
Improved supplier management, portfolio management,
and governance of state-wide acquisitions
Monitored and prioritized spending based on market trends
and developments
Increased collaboration with stakeholders and industry
Establishment of common business requirements that
enables a greater focus on customized needs
Reduced duplication and fragmentation across state-wide
contract vehicles
Focused, streamlined procurement operations
Tracked and reported performance results and category
maturity
Meredith Barnard, Manager
T 703-637-2978
E Meredith.Barnard@us.gt.com
2015 Grant Thornton LLP
U.S. member firm of Grant Thornton International Ltd.