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As part of the Back to Basic article series, let's look at what is category management in public procurement. So in many public procurement shops, the requisition is the daily driver of activity. The production line is humming and customers are getting what they need. But have we left opportunity on the table in that model? Is there more opportunity to capture if we step back and consider all of the spend in a particular market segment? whether that spend is via standing contracts, RFPs, sole source, P-cards, or some other version for your entity. By responding only to the immediate need, we may be undercutting the opportunity to drive economies of scale and missing the opportunities to create maximum benefit for our organization with procurement in the role of a strategic advisor. So what is category management? Instead of buying items or services one sourcing event at a time, Procurement teams can designate certain categories from office supplies to food to IT as strategic and manage those with more comprehensive strategies. The goal is to improve cost, quality, and supplier performance by understanding the market and acting to maximize the overall value. By reviewing all of the categories spent together and assessing how our contracts and sourcing methods deliver a combined outcome, We align procurement to the strategic need. We also allow buyers to develop specialized knowledge and strategies custom to that category and negotiate with the force of our full spend. So this is the essence of category management. So let's take an example. Food is a pretty classic example. Consider all the ways a public entity might buy food. Prime contracts, catering, allowable expenditures on P-cards. There are many other examples. So that's the way that we source. Now consider the three main buyers of food in most public entities like a state or municipality. That's typically going to be healthcare, education, and corrections. Well, we've learned food means entirely different things to each one of those entities. And a single contract for food might serve one, but drive the others to seek exceptions or go off contracts. It's important to note that each one of those departments that is going to be sending a requisition for a particular need is not necessarily going to request a comprehensive strategy. They need the items for their moment and their mission. Only procurement has the span of view across all these needs, so if there's going to be a category strategy, procurement must be the initiator. By viewing all food-related procurements as a single category, even if the individual needs and buyers are different, we can plan for what contracts we may need to fully address the category and then go engage the vendors to align to our model. So implementing category management from the ground up. So you may be saying, Dustin, I don't have perfect spend data and no one has told me I can do this yet. Category management is often seen as a mature stage procurement strategy, something reserved for organization with deep spend analysis and experienced negotiators. But the truth is any shop can start taking actions to start realizing benefits. In fact, some of the biggest gains from category management can come early when organizations begin to shift from first in, first out buying to strategic grouped purchasing decisions. So here's a pathway to build up from nothing with quick wins and earn the right to lead. Level one, find the first case. You don't have to launch a full scale category management program all at once. Pick one or two categories that represent a significant portion of your spend, also frequent purchases, and also are known pain points in your organization. Start there and learn by doing. Level two, engage departments as stakeholders. Category management is not just a procurement function. It's a collaborative business process. Can we gather the buying departments into a brainstorming session on what does or doesn't work about the current capacity to execute? If you can identify the weaknesses in the current methods of contracting in partnership with the customers, excitement and buy-in will come. Level three, creating a sourcing strategy. Instead of immediately fulfilling a requisition in the selected category, ask first what approach to contracting would solve the deeper need? What have peers done? What co-op contracts could be used or at least studied for their approach? Building a sourcing strategy memo or for larger categories, a deeper opportunity assessment is a great way to frame the deeper needs and build support for the effort, especially if it will disrupt current contracting relationships. Level four, execute a category-style sourcing event. So you drive the sourcing strategy and make clear that this effort will be the new contracting model. What am I talking about there? Specifically indicating that the new sourcing event is going to be how your entity will receive those services in the future, And any other conflicting contracts that may exist at the time that you do the sourcing event will not be renewed. This motivates incumbents as well as encourages vendors who are not currently in your vendor pool that this event is important and they need to pay attention because this is the new style. Level five, track performance to measure outcomes. To demonstrate the impact of your efforts, it's important to track key performance indicators, KPIs. Start with a few meaningful metrics that align with the major goals and objectives. This is things like spend under contract, how much of the spend in the category is on contracts that you established and therefore strategically managed. Cost savings or cost avoidance, which is its whole own topic for an article in the future. on-time delivery and service performance, customer satisfaction, etc. So even if you start with manual tracking, these KPIs will show progress and help you refine your strategies and secure continued support from leadership about the strategic role of the procurement shop. Level six, begin to establish a category management practice. So with a win, start to assign specific key categories as a unified responsibility to senior buyers, teach them skills in market research and sourcing strategy development, and ensure those buyers review all requests for sourcing actions in those categories, including sole source actions, exempted purchasing, P-card reports, so that we truly understand how our entity is buying in this category, even if it's not coming through the central procurement shop, and really ensure that their outreach is authentic. Regularly compare category pricing with peers and cooperative contracts and look for opportunities to instill performance measures that align the vendors with the interests of our department customers. So in conclusion, while mature category management is driven by good spend analysis, capacity, and experienced negotiators, we don't need perfect data and culture to begin. We need to identify an opportunity that builds support for the strategic role of procurement and then deliver on that win. Start practical and build over time. Category management is a mindset of looking for value and opportunity and is one of the keys to transforming public procurement.