4 Key Areas of Category Management
“Without continual growth and progress, such words as improvement, achievement, and success have no meaning.” – Benjamin Franklin
Category Management should always have two main objectives.
- Generating savings, but more importantly,
- Maximizing value creation
Let’s discuss how Category Management is the perfect lever for bringing your consulting procurement to the next level.
Measure your Performance
If you worry about team performance, the risks, and the issues associated with a Consulting project, you are totally right…
Companies that have implemented a Category Management System were able to make breakthrough savings (10-30%) and noted improvements in supplier performance, internal client satisfaction, supplier relationships, and visibility on spending.
The problem however is, that Consulting is rarely managed as a category, but rather as part of the indirect procurement together with Travel and Insurance. In some case, Consulting is folded in the professional services category.
But there is a much better way to do it –
The first step to optimizing the Consulting Spend is to recognize Consulting as a strategic category.
Indeed the size of the spend (0.5% to 3% of revenues) added to the potentially significant impact on the business makes it a key enabler of the strategy.
But does Category Management fully apply to the Consulting Category?
Monitoring the Consulting Category – 4 Key Areas
One of the principles of category management is to implement a continuous analysis of the spend, the market, and the performance of the suppliers to identify opportunities for improvement.
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 to 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.
Knowing the Consulting Market is crucial to procure Consulting Services. Leveraging your existing consulting spend, you can analyze the consulting market for the main capabilities of interest for your company. 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 the granularity of your potential needs make it necessary to take a deeper dive into the Consulting Industry.
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.
Consulting Services have an intrinsic human component, that has a direct impact on the performance. Attitude and relationships have a powerful effect on the project’s outcome.
The behavior of the Consultant 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, the 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.
Ready to generate savings?
Need to maximize value creation?
We will be happy to help. Let’s get the conversation started.