4 best practices of category management that will help you create more value from your consulting.
Category management is one of the most popular procurement methodologies, along with strategic sourcing. It aims to reduce the overall costs of your procurement capability and, more importantly, to maximize value creation
Does category management really work with consulting?
Among the many benefits of implementing category management, we can name more valuable insights for decision-making and improved performance of and the relationship with your suppliers.
“Errors using inadequate data are much less than those using no data at all.” Charles Babbage, inventor, and mathematician
That sounds great, right? But there is a problem. Consulting is rarely managed as a standalone category but rather as part of the indirect procurement together with Travel and Insurance. Sometimes, Consulting is folded into the professional services category.
When you hire consultants, it is usually to solve an issue or to prepare for the future. The sourcing process is just a means to get a solution that fits your needs.
But depending on your reliance on external consultants, this category can have a significant impact on your strategy and your business.
But does Category Management fully apply to the Consulting Category?
The main principles of category management are implementing a continuous analysis of the spend, the market, and the performance of the suppliers to identify opportunities for improvement.
1. Analyzing your Spend –
Performing a Spend Analysis is often the first step in aligning the Consulting Procurement Strategy with the Company Strategy. To analyze all the projects outsourced and forecast for the future, you need to aggregate the Consulting Expenses across all organizational divisions.
The objective of the spend analysis is to produce a fully documented understanding of the company’s prior and future spend for Consulting Services, broken down by users and suppliers.
2. Knowing your Market –
Knowing the Consulting Market is crucial to procure Consulting Services. Leveraging your existing consulting spend, you can analyze the consulting market for your company’s main capabilities of interest. The second step, often more complex, given the lack of familiarity with the subject, will be to look at the market for the services you could use to accelerate your objectives and create more value.
The outcome from the Consulting Market Analysis should be a better working knowledge of the supplier market and your place in it. You have identified potential suppliers and know your value as a customer.
But unlike other categories, you cannot limit your supplier analysis to only the major players. The complexity of the market, the diversity of the offerings, and your potential needs’ granularity make it necessary to take a deeper dive into the Consulting Industry.
3. Evaluating the Performance of your Suppliers –
The Supplier Performance Analysis should give you a holistic view on the Performance of your Consulting Providers, broken down per capability, organizational division, and project. It is often based on metrics on tangible performance, such as on-time delivery, respect of the initial budget, and quality of the deliverables.
When your short-list is ready, contact your suppliers and check their interest by sending your RFP.
4. Managing the Human Factor –
Consulting Services have an intrinsic human component that has a direct impact on performance. Attitude and relationships have a powerful effect on the project’s outcome.
The Consultant’s behavior with the different stakeholders, his ability to build trust or to transfer knowledge are parts of the delivery as well.
Especially for Large Companies, it is recommended to look at the performance of the consulting firms at the partner or project manager level. Indeed, it is not unusual to see significant variability of performance when looking at a company level. However, performance can be very well correlated with individuals. In other words, people trump brands, and not all Companies are good at everything. Learn to identify the sweet spot of each of your Potential Providers and the partner that you want to work with, depending on your needs.
Last but not least – a Consulting firm can deliver perfect action plans but fail to support you in the implementation or in transmitting enough knowledge to take over when they leave. Make sure this is taken care of.
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