The following is an extract from Jonathan O’Brien’s book Category Management in Purchasing (3rd Edition) – A Strategic Approach to Maximise Business Profitability
In the UK, Cardiff Council is the unitary authority for the city and county of Cardiff, home to around three hundred and fifty thousand people. The Authority spends £350 million each year on bought-in goods, services and works. As typical with many similar organisations this spend was highly fragmented, procurement was highly tactical and there was precious little cooperation across the Authority and with the important players in the supply base. As part of an overarching commercial strategy, Cardiff launched a procurement transformation program (supported by the University of South Wales Procurement) to kick-start a wholesale change and set a hard target to deliver £18m savings over 5 years. The target, and indeed the entire program, was the result of an extensive spend analysis and review of supplier performance. Category management was selected as the vehicle to achieve this target and so Cardiff set about implementing the approach and a five-year program was launched in 2010. The starting point was a restructuring of the tactical procurement function. A new category centric organisation structure designed around the 44 market facing categories was put in place. These were aligned under three umbrella categories of social care, construction and buildings maintenance and corporate, transport and ICT. A new category management process and toolkit was created and Cardiff then attempted to build capability through training and the recruitment of experienced practitioners. Initially process application was kept as simple as possible, empowering teams to figure out the most effective route through the methodology but building more structure later on. Category teams worked up category plans and a program and project management approach was initiated to look after all projects. As teams began to apply the new tools and techniques cross functional working emerged. Teams had to follow a strict rule to present findings, conclusions and recommendations using only PowerPoint to ensure clarity and focus and meaningful outputs began to appear. Governance built steadily and the Council’s leadership team worked to drive in a new culture built around sharing good practice, compliance and challenge. The executive sponsor received quarterly reports from the Category teams to monitor performance against targets. So far this might read like any other good category management implementation where you put certain things in place and results emerge. However it was not quite that straight forward. Once the program was up and running savings delivery was initially lacking. This was due in part to difficulties recruiting individuals of the right calibre; however there was one other key factor and that was that outside of procurement namely the wider business had not yet begun to own the initiative. In fact, the transformation program only really got going once the different authority directorates made a real commitment to supporting the achievement of savings targets by adopting formal senior sponsor roles and including the projected savings from the category management initiatives within their forward budgets, creating the compelling need to ensure they were delivered. Five years on and Cardiff has not only exceeded the savings targets it set out to achieve, but achieved a much deeper transformation of procurement. Procurement is now viewed as a strategic function with the buy in and support from across the Council directorates who are now looking to a new wave of projects to support the on-going pressure to delivery budget reductions. A recent fitness check conducted by KPMG rated Cardiff procurement as ‘developing to advanced’, with leadership and strategy scoring highly. The work at Cardiff featured a number of steps and activities that contributed to overall category management program success. These were:
- Use of detailed analysis and hard data to determine program priorities and targets
- Creation of a branded transformation program build around category management
- Restructuring procurement around categories
- Developing capability in category management
- Installing strong project / program management
- Driving change through cross functional working
- Embedding strong governance and reporting arrangements
- Building ownership by the business for program outcomes.
- Securing senior management buy-in
In reviewing lessons learnt from the program, the executive team at Cardiff were clear that category management is about driving a wholesale change in procurement but this was only successful when the wider organisation could change together with it. Senior management buy-in was crucial and a lot of success depended upon education and training as well as striking the right balance between tactical and strategic work, after all while the big procurement project is rolling along there is still the day job. Finally, Cardiff identified that the most important success factor was getting people to trust and have faith that the program would work and was worthwhile.