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Category management in procurement is a strategy used to group similar types of goods and services to improve buying efficiency and reduce costs. Instead of considering each purchase separately, category management takes a more holistic approach to optimize value across both direct and indirect procurement categories.
Effective category management requires analysis of spending and categories to equip category managers with the expertise they need to make informed decisions. With a deep understanding of market trends, supplier capabilities, and institutional goals and objectives, category managers can negotiate better contracts and find ways to reduce costs.
You can think of category management as a strategy that has three distinct aspects:
Portfolio management involves analyzing and optimizing the institution’s entire portfolio of products and services across all categories. It requires a comprehensive understanding of the institution’s spend, supplier base, and contractual agreements.
Effective portfolio management involves:
Strategic sourcing identifies, evaluates, and selects the best suppliers to meet college or university needs. It involves a thorough analysis of the supply market and supplier capabilities and negotiating favorable terms and conditions.
Strategic sourcing includes:
Supplier relationship management involves building close relationships with key suppliers. Taking this collaborative approach results in more effective communication, performance monitoring, and continuous improvement.
The fundamental components to supplier management include:
Category management in procurement creates a more strategic approach to sourcing and purchasing.
Categorizing purchases into logical groups provides a clear view of where money is spent across the institution. For example, grouping all lab equipment and supplies into one category allows visibility into the total spend for sciences, identifying opportunities for cost savings through negotiated pricing or demand management.
With purchases organized into categories, sourcing teams can develop tailored sourcing strategies leveraging in-depth category knowledge. An example would be in marketing. By analyzing marketing, you can identify industry trends, research innovative suppliers, and find the best-fit supplier for the university’s branding and promotional needs.
Managing supplier relationships becomes streamlined when suppliers are aligned to specific categories. For example, an IT category manager can implement a targeted supplier performance program with metrics focused on service level agreements, cybersecurity compliance, and innovation roadmaps relevant to the university’s tech stack.
Spend analysis within categories highlights areas for standardizing specifications and consolidating purchasing volumes. For office supplies, the category manager might standardize eco-friendly products from preferred suppliers while leveraging bulk purchases for discounts across all departments.
Category management in procurement fosters specialized expertise within assigned areas. For example, the construction category manager becomes the subject matter expert, implementing best practices in contractor prequalification, project management, and sustainability in campus building projects.
This specialized knowledge goes well beyond just sourcing and procuring suppliers, aiding in the successful execution of the project. Knowledge gained from one project helps improve future projects.
Effective category management provides significant benefits to boost the bottom line, reduce wasteful spending, and streamline procurement:
Without a well-defined category management strategy, higher education institutions face several key risks:
Lack of spend visibility across categories leads to missed cost-saving opportunities through supplier consolidation, volume leverage, and negotiated discounts. Decentralized buying often results in fragmented contracts with inconsistent pricing and terms.
Uncoordinated purchasing efforts often create duplication of work, administrative bottlenecks, and challenges in harnessing data. This hinders the ability to make strategic decisions. Ad-hoc buying tends to prioritize near-term needs over long-range planning.
Failure to systematically manage suppliers increases institutional exposure through inadequate vetting, neglected performance, and missed opportunities to collaborate to increase value.
The absence of defined specifications and approved catalogs can result in quality or incompatibility issues, negatively impacting colleges and universities while adding expense to the bottom line.
Fragmented purchasing limits visibility into key spend drivers and demand signals.
Decentralized buying environments without robust contract management and policy enforcement open the door to legal, regulatory, and reputational risk from non-compliance.
The five pillars of category management in procurement include:
Sufficiency ensures that higher education institutions have access to the right products and services, in the right quantities, at the right time to meet their needs. This requires accurate inventory management and demand forecasting to avoid shortfalls.
Achieving sufficiency requires collaboration between procurement teams and end-user departments across academics, research, facilities, housing, athletics, and other departments. This alignment ensures procurement has full visibility into future requirements.
Visibility is crucial for higher education procurement to gain transparency into purchasing across categories and to leverage spend analysis. With granular visibility into spending patterns, sourcing teams can identify opportunities for consolidating purchases, negotiating volume discounts, and standardizing preferred products/suppliers.
It will also highlight maverick spend to find areas that fall outside approved contracts.
Standardized, repeatable processes and strategies for each procurement category ensure a structured approach to supply market analysis, solicitation, bid evaluations, and contract management. By establishing systematic category management, colleges and universities can achieve continuous improvement over time.
Streamlining the procurement lifecycle reduces administrative waste and cycle times while still maintaining appropriate oversight and governance. Strategies include automating transactional procurement, implementing e-procurement tools, consolidating purchases within categories, and leveraging cooperative contracts.
Compatibility ensures procurement activities and sourced solutions align with and support the university’s broader mission and objectives around academics, research, student experience, community impact, and more—for example, sourcing sustainable products, utilizing diverse suppliers, and providing innovative solutions that enhance learning outcomes.
This compatibility requires close integration between procurement and stakeholders across the institution to deeply understand future needs and priorities.
In higher education procurement, there is an important difference between direct and indirect spending categories:
Direct spending refers to purchases that are directly tied to the core missions of teaching, learning, and research. These are essential goods and services essential to the primary activities of the institution. Examples include:
Effectively managing these direct categories is critical for maintaining an exceptional academic environment and supporting cutting-edge research initiatives. Strategies focus on ensuring the availability of high-quality resources aligned with evolving curricula and new areas of study.
Indirect spending supports the general operational functions allowing the university to effectively carry out its mission. Examples include:
Optimizing indirect categories through strategic sourcing creates cost efficiencies that can help fund investments in direct academic areas.
Cooperative purchasing agreements are a powerful tool in the category manager’s toolkit for streamlining procurement while still capturing value across the supply chain. By leveraging the collective buying power of multiple institutions, cooperative contracts allow universities to achieve better pricing and terms than they could on their own.
For many indirect procurement categories, like office supplies, IT hardware/software, and facilities maintenance and services, cooperative contracts can deliver significant benefits, such as:
By aggregating demand across institutions, you create increased purchasing power to incentivize suppliers to offer better pricing, discounts, and favorable terms.
Rather than each school independently conducting duplicative work like RFPs, market research, and negotiations, a sourcing cooperative handles these efforts once using their category experts. Colleges and universities can opt in when cooperative contracts are available to meet their goals.
Cooperative contracts have rigorous approval processes that vet suppliers on aspects like capabilities, quality, compliance, and financials. This lets you adopt solutions confidentially while reducing risk.
With a cooperative’s pre-negotiated and ready-to-execute pricing, institutions simply need to review, customize as needed, and sign the agreement rather than engage in protracted negotiations themselves.
You can also use cooperative contracts when you need to make emergency or time-sensitive purchases that do not allow you to conduct a thorough category evaluation or bidding process. Cooperative contracts are competitively sourced to meet most requirements.
The best group purchasing organizations (GPOs) have experienced category experts to guide sourcing and procurement.
E&I Cooperative Services focuses exclusively on the education sector, leveraging the group buying power of its 6,000 member institutions to realize significant cost savings. As a member-owned, non-profit cooperative, E&I Cooperative Services can help you streamline your category management, sourcing, and procurement.
Many cooperative contracts through E&I include education-specific rebates and incentives in addition to volume pricing discounts. E&I also provides patronage refunds based on a member’s purchasing volume throughout the year. Although there is no obligation to use these contracts and no purchase minimums, members can share in a percentage of the net profits in the form of patronage refunds and certificates of equity. Over the past several years, E&I Cooperative Services has distributed more than $10 million in patronage to members.
What are the five steps of category management?
The five steps of category management include:
What are the four pillars of strategic sourcing?
These four pillars provide the foundation for strategic sourcing:
What are good examples of category management?
Common categories for management include IT hardware and software, professional services, marketing and advertising, travel, construction and facilities, lab supplies, office supplies, classroom supplies, and transportation.
Bundling goods or services into these categories allows you to consolidate spending where possible to achieve volume discounts, eliminate duplication of effort, and develop stronger supplier relationships.
What is an example of a category management strategy?
For the facilities operations and maintenance category, a strategy could involve consolidating suppliers by geographic region, implementing preventative maintenance programs to reduce reactive work, and standardizing purchasing on sustainable products.
Contact E&I Cooperative Services today to leverage cooperative contracts as part of your category management procurement strategy to boost your bottom line.
