Category management: the key to collaboration?

Sourcing and purchasing departments should function symbiotically—two parts of procurement whole. However, many organizations find that the alignment is not as strong as they would hope, which has led to some self-reflection on the best way to build symmetry into the departments. This can come down to a question of philosophy. What are your organization’s guiding principles? Do they prioritize collaboration and operational holism? Or are departments internally focused on individual performance? Best practice organizations typically favor the former and to great effect. One way to instantiate collaboration in sourcing and purchasing is through category management, which encourages sourcing specialists and buyers to function dyadically. Is category management right for you? Read on to explore its benefits, how to effectively measure its success, and understand its effects on staff career development.

Is category management an effective way to align purchasing and sourcing?

Category management can prompt partnerships between sourcing specialists and buyers by having them focus on a shared product type. For instance, a sourcing specialist and a buyer might be assigned to procurement functions related to a product category, such as medical surgical products, pharmacy, biomedical, business services, information services, and facility management products. This collaborative model improves visibility and helps teams stay nimble and responsive to procurement-related issues.

One large academic health system in the Midwest structures its sourcing and purchasing departments according to this philosophy, merging them into a single department named procurement services. Since, under procurement services, purchasing and sourcing are not considered separate departments, the names refer only to a segregation of duties. Purchasing comprises senior buyers and buyers. Senior buyers are able to conduct negotiations and establish pricing agreements, and buyers perform transactional functions. Each category is also assigned one or two category managers responsible for sourcing activities. To help facilitate collaboration, a small team of contract administrators supports both verticals. Likewise, a content data management team collaborates with the vertical to maintain the item master and the ERP. Buyers and sourcing specialists do report to different managers, but those managers report to a single director of procurements services, strengthening the alignment.

With a stratified staffing structure and segregated duties, what are best practices for measuring productivity?

Measuring productivity for sourcing and purchasing can be challenging because of the varying levels of complexity for different product types. For instance, one sourcing specialist may complete three contracts in a month while their colleague completes over a dozen during the same period. Just looking at the numbers, the second sourcing specialist would appear to be more productive. But the numbers do not account for how difficult a contract was to complete or its financial impact on the organization. One way to adjust for complexity is to measure touches, which refer to any time a contract drafting or review function is performed. That can include redlines, vendor communication, modifying a contract, and confirming pricing. If an organization wants to adopt this method, it should take time to carefully determine what constitutes a touch and remain consistent when evaluating staff productivity.

Purchasing productivity may be easier to assess, since purchasing is transactional, and transactions are generally simple to measure. However, highly automated transactions for main inventory items can skew the numbers in favor of buyers working in those product lines. So, it can be helpful to contextualize purchase volumes by looking also at dollars and lines by individual over a specified time span.

What are some strategies for establishing career paths for sourcing and procurement staff?

Employees prefer when an organization has a clearly define career ladder. However, sourcing and purchasing departments may not have the career mobility available to other departments. Management positions are few and sourcing specialists become more effective over time focusing on a specific product area. When an organization chooses the category management model, the structure can become even more fixed, since each set of duties requires different competencies, education, and awareness. Therefore, it may be hard for a buyer to move into a contract administrator or sourcing specialist role if they do not possess the requisite competencies. With those limitations, it becomes more important for organizations to be upfront about what they expect from employees at certain stages of their careers. And they can reward staff that meet or exceed those expectations through compensation rather than promotion. It is important to note there are exceptions, and some employees will organically expand into other roles for which they are a good fit.