Building The Business Case for Category Management – Future Purchasing Report

We told you last week that practitioners can now request a copy of the excellent Future Purchasing category management survey report here. Requests will go through Future Purchasing rather than giving you an instant download, purely so that the firm don’t find every other consultant copying their ideas and processes. (You will however be able to get the short summary immediately.)

The firm has also started producing summary documents that take some of the key findings from the report and put them into easily digestible and useful shorter reports. The first is now available here to download and looks at the business case for category management.

When you think about category management (“CatMan”) from the point of view of its development within the organisation, there are two key parameters that determine the potential to deliver further benefits. Whether we focus purely on “savings” or take a wider view of the benefits, the first point is obviously the effectiveness of the CatMan work, and the level of the benefits that are derived from its implementation.

Sticking just to savings for simplicity’s sake, the “leaders” as defined in the study achieve 11% savings from their CatMan programmes. "Followers" as defined in the study, on average claim 7.7%. And respondents believe that the savings could be as high as 15% or more if CatMan were implemented fully in a true best practice manner. So that gap defines the potential if the leaders can raise their game, and followers make even bigger strides.

But equally important is the coverage of the programme. You might make huge savings of 20% but if you are only applying CatMan to 10% of the total third-party spend, then obviously the overall benefit is not that impressive on a total business basis. You would be better making a 5% saving but covering 50% of the spend (although we should take account of the cost of the programme too, if we want to be really rigourous in the analysis of course).

The Future Purchasing survey suggests that “followers” on average cover less than 40% of spend, for the leaders it is up around the 60-70% range. So again, followers can benefit by aspiring to that level, and indeed even the leaders feel that they could achieve coverage of some 80%.

So that all begins to give the picture of how to construct this business case for developing a stronger CatMan programme, and the investment that may be needed – whether that is in staff, training, tools or technology. We’ll come back to the survey and the results soon, and there will be a webinar coming shortly too on March 14th – look out for more news on that soon.

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