Category management key to managing public sector cost pressures

A procurement expert has stated that the key to successful cost reduction efforts lies with…...

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A procurement expert has stated that the key to successful cost reduction efforts lies with effective category management and strategy. Attending London’s World of Procurement event in Earl’s Court, Paul Smith, deputy manager at purchasing organisation YPO, told Supply Management (SM) magazine that balancing cost pressures effectively amounted to: “having good category strategy and implementing category management.”

Mr Smith’s observations coincide with the findings of a new survey from public sector procurement framework services provider, Fusion21, which show that public purchasers feel under pressure to focus on cost over quality. He told SM journalist, Lucy Patchett, that it was necessary to distinguish between commodity-based categories that are highly price-driven, and others that need more innovation and more open tenders to drive more value out of the tender. He added: “So I think it comes from having a good category strategy that understands the market and understands where best to pitch the weighting of cost and price and value overall. It’s about having category managers that engage with the market, understand the supply base and customers needs, and the constraints and what’s required, and then generate a category strategy from them.”

The survey found that over half (59%) of procurement managers, directors, and supply chain practitioners operating in the UK public sector felt under pressure to buy at the lowest price, while 55% reported that their decision-making was influenced by spending constraints. The study polled 100 public sector procurement professionals working for education, health, housing, and local authority organisations. 72% rated compliance with regulations as “extremely important”, while 64% reported that social value had risen in importance during the previous 12 months.

Commenting on the impact of government cuts, a housing association manager quoted in the report, said that it was nonetheless essential for his colleagues to continue providing services without compromising on quality. All tender documents, he explained, contain key performance indicators to ensure suppliers deliver what was expected of them.

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