Harnessing procurement value through technology-enabled category management

In a challenging landscape, creating efficiencies with technology-enabled category management is playing a key role in harnessing value.

As businesses strategize their way out of a slowing economy, focusing on bottom-line cost efficiencies is top of mind. 

Procurement-driven value creation should be a critical part of the response strategy for business leaders. Procurement’s role has evolved as they take the lead in navigating price volatility, supply shortages, persistent inflationary markets, and regulatory requirements around sustainability.

At the heart of this ongoing transformation lies the concept of category management — a detailed approach to procurement that entails strategic management of goods and services across various categories.
   

The benefits of category management are substantial, ranging from improving total cost of ownership to facilitating informed procurement decisions and stronger supplier relationships. However, the journey to harnessing the full potential of category management is riddled with challenges.
   

Lack of reliable and complete data, the demanding task of governance and stakeholder collaboration, and ad-hoc category strategy development processes act as impediments to success. This has a knock-on effect on the brand of procurement within the organization.
   

Here are four ways in which  leading-edge technologies offer solutions to these challenges while generating a positive return on investment:

1.       Implementation of governance – translating theory into practice: Effective governance and collaboration among stakeholders is critical for category management success. In the EY organization’s experience, this is the biggest failing point of effective category management. While developing paper-based governance models with well-defined RACIs look good in theory, making them a way of working in “business as usual” remains a challenge. Technology solutions provide centralized platforms for governance and collaboration, embedding alignment and focus across the organization.

2.       Automation of processes – reducing manual effort: One of the biggest roadblocks to successful category management is the significant manual effort required to develop, execute and monitor category strategies. Technology platforms automate these tasks, freeing up valuable resources and allowing procurement teams to focus on strategic initiatives on an ongoing basis.

3.       Data visibility, leading practice process, and standardized analysis templates – accelerating decision making: Traditional procurement approaches and disparate sources of data often struggle to provide broad visibility into spending patterns and procurement demand. This, coupled with a lack of standardized templates, hinders development of effective category strategies. Leading technology solutions offer advanced analytics and real-time data access tailored into easy-to-use templates — for example, SWOT and Porter’s Five Forces analyses — that help users focus on the insights and decision-making. More importantly, however, the tools enhances the brand equity of procurement as a strategic partner within the organization. 

4.       Tracking, monitoring and reporting of category performance – bringing discipline to managing spend: Even the best laid-out category strategies fail to sustain value due to lack of tracking the key performance indicators (KPIs). KPIs should include the financial and non-financial benefits generated, the health of sourcing and/or non-sourcing projects underway, spend under management and more. Leading technology solutions integrate spectrum of source-to-pay activities to generate customized category performance dashboards that provide real-time information. This enables category managers to identify and focus on key areas.

EY is helping organizations use technology to enable category management.

The EY organization and our alliance partners bring the depth of category management experience facilitated by leading technology solutions to help organizations achieve better value-for-money outcomes from procurement.