Are we shoppers or intelligent buyers?- Blog by Mike Thomsett

So anyone can shop but intelligent buying requires a level of clear business need, some market research, maybe a tender activity and more often a business case that provides the return on investment.

I always remember my first foray into Category Management. At the time I was a young 24 year old working at a FTSE10 retailer. Being relatively new to procurement I was still learning the ropes and thought that because the pace of work was so frenetic, it felt like the structure, the governance, the decisions were all solid.

That wasn’t the case. I piloted a new  programme to demonstrate the value of category management. The project, Electronic Shelf Edge labels for stores around the country. The company had spent 15 years investing in an attempt to find the next best solution to expensive and laborious routines on the shop floor. If a solution could be found to deliver promotional and price updates directly from the commercial systems to the shelf edge, millions of hours of time from store staff could be saved and deliver instant commercial change agreed between the buying community and suppliers.

So what do you do in this situation to apply category management to this equation??? It always starts with data and strategy. In this example it was clear that 15 years and millions of pounds had been invested. It was also clear that the end goal made absolute sense for an organisation always looking to streamline the operations through the investment of leading edge technology. There was a flaw however. The unit cost installed was heavily excessive and it appeared that there wasn’t a business case that supported the investment. No not a business case that didn’t stack up, NO business case at all. Essentially some rogue technology geeks, spending their time and the company’s money on a range of ideas that may never come to fruition. If you know retail, you will know that investment money is always expected to be applied wisely and with some degree of confidence. The idea of being responsible for sunk cost is seriously undesirable on the CV.

The solution! Working up a business case was the only solution to making sense of this opportunity. In fact, having completed this exercise it became apparent that even reverse engineering the technology and testing the manufacturing costs in China via Alan Sugar’s Amstrad, this business case had to reduce the unit cost from £2.55p to £0.15p in order pass the investment hurdle rate. As a result no more money was invested into a pursuit that didn’t pay back!

Category Management can not only be used to provide clear strategy on how to procure and manage the market across multiple spend areas, but also as a vehicle to challenge existing ways of working and ensure that businesses are investing in the right way, making use of resources in the right way and ensuring that strategy is translated into REAL LIVE deliverables.

Suffice to say that Category Management in this organisation got the green light and a full deployment across 16 territories then followed as the Standard Operating Model and continues today. Another win for Procurement and that’s the reason why!!!!

–Mike Thomsett