Good category strategy can help overcome cost pressures

15 July 2019

The key to overcoming cost pressures lies with good category strategy and management, according to YPO.

At the World of Procurement in London, Paul Smith, deputy managing director at buying organisation YPO, told SM that successfully balancing cost pressures with quality “comes down to having good category strategy and implementing category management”.

His comments come as a survey from Fusion21 shows public buyers are feeling under pressure to focus on cost over quality.

“There are some commodity-based categories that are far more price-driven, while some require more innovation and far more open tenders that can drive a lot more value out of the tender, without focusing so much on price and cost,” said Smith. “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.”

Speaking to delegates at the event, Jeremy Brim, director at The Bidding Tool, said that “austerity and efficiency has dictated that something needs to change in public procurement”, and that “we’ve almost hit a breaking point” with budget pressures.

Fusion21’s Procurement Trends Report 2019 found more than half (59%) of UK public buyers felt under pressure to procure at the lowest price.

And more than half (55%) of procurement managers, directors and supply chain officers agreed decision-making was most affected by financial constraints. 

Half of respondents (47%) said cost savings were “extremely important” in procurement, compared to 37% who said quality was.

In the report a housing association procurement manager said: “Despite government cuts, it is essential we try to continue to provide the same services without compromising quality. We set key performance indicators within tender documents, and ensure suppliers deliver what we expect.”

Compliance with regulations was cited as extremely important by 72% of professionals, while 64% said social value had become more important in the last 12 months. 

The survey involved 100 procurement professionals from organisations including housing, local authority, education, and health. 

Sarah Rothwell, head of member engagement at Fusion21, a framework services provider, said: “We believe that procurement compliance is now a given for the organisations we work with, and quality is considered to be something over and above meeting legal and regulatory public procurement requirements.

“Some contributors outlined how they achieve more with less by using spending power to insist on certain levels of quality. This is coupled with building relationships with potential suppliers to help secure long-term cost savings.”

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