Category management is a tried-and-true staple in the procurement toolkit. What about category management for consulting?

Curiously, when it comes to consulting, this revered tool seems to be left in the toolbox more often than not. Why the hesitation? Is there something inherently different about consulting that makes it resistant to the usual charm of category management?

As we explore this space, we aim to decipher why this established method isn’t commonly applied to consulting and whether it should be. Time to navigate this intriguing divergence in the business landscape.

What is Category Management?

Category management is one of the most popular procurement methodologies, along with strategic sourcing. It aims to reduce the overall costs of your procurement capability and, more importantly, to maximize value creation.

Moreover, category management has a lot of benefits, such as giving you more useful information for making decisions and helping your suppliers do a better job and get along with you better.

“Errors using inadequate data are much less than those using no data at all.” Charles Babbage, inventor, and mathematician

Can You Leverage Category Management for Consulting? Does This Tool Fully Apply to Consulting?

Consulting is seldom handled as a separate category, but rather as part of indirect procurement alongside Travel and Insurance. Consulting is sometimes included in the professional services category as well.

However, professional services also include legal, engineering, executive search, and real estate services, which are vastly distinct from Consulting Services in terms of what they accomplish and with whom they collaborate.

Hence, the first step in figuring out how to get the most out of your consulting spend is to see consulting as a strategic category.

In fact, the size of the spend (0.5% to 3% of revenues) and the fact that it could have a big effect on the business make it a key part of the strategy.

No offense to Travel Management, but even if savings are big, they rarely make a difference to the share price or the enterprise value.

4 Best Practices of Category Management

The main principles of category management are: implementing a continuous analysis of the spend, the market, the performance of the suppliers to identify opportunities for improvement, and the human factor. Now let’s get into those in a bit more detail.

#1. Analyzing Your Spend

Performing a spend analysis is often the first step in aligning the consulting procurement strategy with the company strategy. To look at all the outsourced projects and make plans for the future, you need to add up the consulting expenses from all parts of the organization.

The main goal of the spend analysis is to find out how much the company has spent on consulting services in the past, and how much it will spend in the future.

#2. Knowing Your Market

To acquire consulting services, it is essential to understand the consulting market. You can examine the consulting market for the key competencies of your organization by leveraging your current consulting spending.

The second stage will be to look at the market for the services you could be using to accelerate your goals and add more value, which is frequently more difficult given the lack of expertise with the topic.

The result of the consulting market analysis should be a deeper understanding of the supplier market and your position within it. You are aware of your worth as a customer and have identified possible suppliers.

You cannot, however, restrict your supplier analysis to just the top players, unlike in other categories. It is vital to go deeper into the consulting industry due to the market’s complexity, the variety of offers, and the specificity of your future needs.

#3. Evaluating the Performance of Your Suppliers

The Supplier Performance Analysis should provide you with a comprehensive perspective of your Consulting Providers’ Performance, segmented by capability, organizational division, and project.

It is frequently based on measurable performance indicators, such as on-time delivery, budget compliance, and quality of deliverables.

Moreover, when your shortlist is ready, contact your suppliers and check their interest by sending your RFP.

#4. Managing the Human Factor

Consulting services naturally have a human element that directly affects output. The consultant’s interactions with the various stakeholders, his capacity to foster trust or impart knowledge, and his demeanor all play a role in the delivery.

Especially for large companies, it is advised to evaluate the effectiveness of consulting companies at the partner level. Indeed, it is not uncommon to observe significant performance variation at the firm level. Nonetheless, performance is highly connected with individuals.

In other words, individuals overpower brands, and not all businesses excel at everything. Learn to find the sweet spot of each of your potential providers and the partner you want to collaborate with based on your requirements.

And last but not least, even if it’s intangible, the anticipated influence of the project must also be considered.

A consulting firm may produce flawless action plans, but will not assist you in their implementation or transfer sufficient knowledge for you to take over when they go.

Closing Thoughts

In wrapping up our exploration, one thing becomes clear: category management isn’t an exclusive club; it’s open to consulting too. In fact, not only is it applicable, but it also has the potential to deliver substantial value to the table.

Yet, here lies the rub – category management for consulting demands dedication, time, and energy for effective execution. Obviously, managing a category, especially one as diverse, scattered, and intangible as consulting, is no casual affair.

It’s a challenge that requires a nuanced approach, an understanding of the intricacies, and a readiness to embrace the uniqueness of consulting within the realm of category management.

While it might be a bumpy ride, the rewards of streamlined processes, enhanced supplier relationships, and optimized spend are certainly worth the effort.

So, as we sign off, remember: while consulting may not be the easiest puzzle to solve within the category management landscape, it’s certainly one that can yield some of the most gratifying pieces of value when put together thoughtfully.

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