Category Management in English Local Councils Survey Results Author: Ken Cole FCIPS Date: 31 st December 2012 Version: 1.0 Final SPS Consultancy Services Ltd.
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3 Category Management Survey Analysis Contents One Minute Summary 4 1. Introduction 5 1.1 Background 5 2. Research Findings 6 2.1 Survey Outcomes 6 2.2 Conclusions 8 Appendix A Survey Questions 10 About SPS Consultancy Services Ltd 11
4 Category Management Survey Analysis One Minute Summary Category management has its origins in the retail sector and is about grouping the commissioning and procurement of products and services which share similar attributes in order to create centres of expertise. Unifying the processes associated with the specification, researching, sourcing, contracting and delivery brings with it significant financial and business benefits. For a tier one local authority these include unit cost reductions, improved quality of services and better engagement and performance by contractors. As a result of these acknowledged benefits lots of tier one authorities have committed themselves to adopting category management. District authorities (tier 2) are usually too small on their own to implement category management, although there is a strong case for them merging their volumes in some areas with larger authorities. SPS Consultancy Services is a lead specialist in procurement transformation and we are keen to understand the extent to which category management has taken root in English local government and how it is being adopted. We undertook an online survey with councils in three regions (, and ) and attracted responses from 37 unique authorities in these regions. This short report summarises the replies and outcomes we received. As expected, the survey showed that category management was only being pursued by tier one authorities in simple terms the larger the third party expenditure, the more likely that category management was being adopted. This will be of encouragement to the Local Government Association (LGA) and Society of Purchasing Officers (SOPO) who are working with the Department of Communities and Local Government (CLG) on a new national procurement strategy which we understand includes a significant amount on reshaping the way English local authorities acquire their 60B third party goods and services each financial year. However, the survey also revealed some potential weaknesses and missed opportunities. These include: Category managers being responsible for multiple categories raising questions as to whether real category management is being practiced Below average remuneration for category managers, again suggesting compromises are being made Lack of aggregation and sharing between councils with teams for identical categories A disconnect with the district authorities who would benefit considerably from including their requirements / volumes for many common items and services with larger public sector organisations Adopting category management requires a transformation in the way an authority thinks, acts and engages with markets and suppliers. While sharing knowledge and breaking down internal communication barriers between commissioners and buyers is essential for category management to succeed, the real benefits accrue once an authority decides at which level it should be seeking to contract. Doing everything independently neither makes commercial sense nor is a good use of scarce resources. Our survey shows good progress, but indicates there is much to play for.
5 Category Management Survey Analysis 1. Introduction 1.1 Background This short report analyses the outcomes from the category management survey that was carried out by SPS Consultancy Services between 1 st November 2012 and 7 th December 2012. The survey was designed to ascertain just how established category management is across English local councils and what, if any barriers, existed to its wider uptake. Initially, it was intended to carry out the survey across each of the nine English regions. However, this was not possible because of internal pressure on time and resources. It has been progressively harder to undertake studies of this nature since the demise of the RIEPs in 2011as the level of multi-authority coordination that exists in some regions has fallen dramatically. However, we were actively supported in three regions;, and. We would like to thank Eddie Gibson (Improvement East), Terry Brewer () and Clare Smart (Gloucestershire County Council) for their active support and encouragement. The survey was undertaken using SurveyMonkey. Copies of the questions are at Appendix A and were identical in each region.
6 Category Management Survey Analysis 2. Research Findings 2.1 Survey Outcomes The survey attracted a total of 37 unique responses. Table 1 shows the breakdown by council type and region (regional results are available on request). The two other organisations were Greenfields Community Housing and Essex Fire and Rescue Service, both members of the Procurement Agency for Essex (PAE) in. Council Type / Region County 0 3 3 6 Borough 8 0 0 8 Unitary 0 6 4 10 District 0 1 10 11 Other Public Sector 0 0 2 2 Table 1 breakdown by council type and region The responses received although not large compared with similar surveys are still encouraging. Table 2 shows the numbers expressed as a percentage of the English local councils. Council Type Responses Number of English Councils by type Percentage of the total County 6 27 22% Borough 8 33 24% Unitary 10 55 18% District 11 192 6% Table 2 responses as a percentage of total number of councils by type Question 2 asked whether the council had adopted category management. The choice of answer was yes, no and planning to introduce it. 17 councils indicated that they had, 15 that they had not and 5 were planning to introduce it. Table 3 shows a breakdown of answers by region and council type. Region Yes No Planning Type of Councils and Observations 6 10 3 Of the 10 no responses eight were district authorities and two other public sector 6 2 0 All boroughs 5 3 2 Of the 2 no responses one was a district authority and one a unitary authority s 17 15 5 Table 3 has you council introduced category management? Of the five planning to introduce category management three were planning to do it within the next calendar year. Those that answered no were asked to give their reasons from a given list. Multiple answers were possible and Table 4 shows the responses given.
7 Category Management Survey Analysis Reason Organisation too small 0 2 7 9 No business case 1 1 1 3 No resources to do it 2 2 3 7 Unclear of its value 1 2 3 6 Insufficient information to consider it 0 1 0 1 Not enough time to consider it 0 2 0 2 No management support for it 1 1 0 2 Other free text 0 1 done a few bits of it 1 unsure whether financial system can support it Table 4 reasons for not implementing category management As expected organisation too small was the main reason given for not adopting category management, which is not surprising given that all bar three of the organisations not adopting it are district authorities. However, this is not the only reason. For the three larger organisations, no resources to do it was prominent as was unclear of its value. The next question asked those councils that had adopted category management to state for which categories. Again multiple answers were possible and Table 5 shows the responses given. The categories were mixed up to include the more obvious choices such as ICT with the more challenging such as Children s Services. 2 Category ICT 4 5 5 14 Postal Services 4 3 3 10 Facilities Management 4 5 5 14 Fleet acquisition and management 3 4 4 11 Adult Social Care 3 4 4 11 Transport 3 5 4 12 Childrens Services 3 4 4 11 Waste Collection / Disposal 3 4 4 11 Energy 4 5 3 12 Construction (new build) 4 4 3 11 Construction (repair and maintenance) 4 5 4 13 Food and catering 3 4 3 10 Office supplies (stationery and furniture) 4 5 3 12 Other free text 0 2 Professional Services Table 5 where has category management been adopted 0 2 Unsurprisingly, ICT and Fleet topped the list and were the number one categories across the three regions. What was surprising was the close correlation between the top number scored at 14 and the bottom number scored at 10. The bottom two categories were postal services and food and catering, both of which are logical candidates for a category management strategy. However, it was encouraging to see the traditionally diffcicult categories, such as waste and adult care also featuring strongly. The next question was designed to find out how many category managers each authority had in post. A choice of three bands was offered; 1-3. 4-7 and 7+. Table 6 shows the responses by region and totals.
8 Category Management Survey Analysis Number in post 1-3 3 0 3 6 4-7 1 3 1 5 7+ 0 2 1 3 Table 6 number of category managers in post All three councils claiming more than 7 are counties; Essex, Gloucestershire and Dorset respectively. Interestingly has a low uptake which may reflect the higher costs of staff in the Capital. region has clearly been keen where all five of the authorities who have adopted category management have more than four managers in place. Question 7 enquired about the pay ranges for their category managers when in post. A choice of three bands was offered; < 40k, 40k to 60k, and 60k to. 80k. Table 7 shows the responses received and by region. Salary Range < 40k 1 1 1 3 40k to 60k 3 3 4 10 60k to 80k 0 1 0 1 Table 7 salary ranges for category managers The 40k to 60k band is clearly the most prominent, even in where pay ranges tend to be higher because of local economic factors. Only one authority in region claims to be paying over 60k (a County) and this may because there is some private sector involvement in running procurement. The final question asked whether the councils involved would be prepared to collaborate with other authorities to merge volumes where there was a mutual interest. Not surprisingly there was overwhelming support for this approach as Table 8 illustrates. However, there was some qualification, with a significant minority saying depends on the category. Prepared to collaborate Yes 2 5 3 10 No 0 0 0 0 Depends on Category 2 0 2 4 Table 8 Prepared to collaborate with other councils Participants were asked if they were prepared to leave their contact details and 30 (81%) did so. 2.2 Conclusions Although limited to three regions, the survey confirms quite a few trends already suspected and gives a good insight to the current way category management is being approached across English local government. Conclusions that can be drawn include: District authorities are too small, as suspected, to undertake category management. At the same time there was no evidence to suggest that they were interested in merging their volumes with other larger authorities Category management is best established in county councils. These have by far the largest third party spend in the 600M to 1,000M range It has not been adopted across all Tier one authorities or boroughs (average third party spend 250M) or unitary authorities (average third party spend 60M to 200M)
9 Category Management Survey Analysis Lack of resources and uncertainty as to the value it would bring are the main reasons for Tier 1 authorities not adopting category management There is a tendency for authorities to tackle the larger spend, and more challenging categories (e.g. adult care / waste), rather than the smaller spend areas (food and catering, energy) where there is a compelling and proven case for using it, albeit on a multi-authority basis The number of people in post is far less than the number of categories being managed, suggesting either vacancies or managers looking after multiple categories The pay ranges are at the level where most authorities would struggle to recruit and retain staff. Good category managers cost over 60K per annum although only one authority was paying this The combination of post holders managing multiple categories and the current pay ranges indicate that some authorities may have only changed their structure to suggest the use of category managers rather than adopting it in its intended form There is no evidence of authorities looking to establish cross sector category management teams an opportunity with huge savings potential that needs to be examined by English local government There is a clear willingness to collaborate, but some authorities do not appear to wish to entertain this across the board
10 Category Management Survey Analysis Appendix A Survey Questions 1. In which council do you work? 2. Has your council introduced category management? 3. Why is your authority not implementing a category management strategy? (Multiple choice tick all that apply) 4. When do you plan to introduce it? 5. In which categories do you practice category management? (Multiple choice tick all that apply) 6. How many category managers do you currently have in post? 7. What is the average annual salary range you pay for category managers? 8. Would you be prepared to collaborate with other local authorities to share information and merge volumes where you have a mutual interest in the same categories? 9. May we have your email address?
11 Category Management Survey Analysis About SPS Consultancy Services Ltd SPS are leading experts in the field of procurement transformation and change management. We have helped a wide variety of UK public and private sector organisations transform their procurement activities, delivering millions of pounds in cashable savings along the way. We have the track record and the experience and we understand the financial and procurement challenges every organisation is facing in a climate of financial austerity. Our innovative solutions, ideas and policies always reflect broader business issues such as culture change, communication, people skills and collaborative working, which we know have a huge effect on an organisation's ability to achieve results. Research and knowledge sharing is central to our approach. We regularly produce incisive, free-to-access White Papers sharing our insights into the latest "hot" issues in procurement and efficiency. Recent White Papers have included methodologies for complex areas such as performance measurement, procurement classification and common performance assessment for local government. We also provide a wide range of on site skills and knowledge transfer programmes that have been highly acclaimed by those organisations that have taken part in them. Information on all of these things is available on our website www.sps-consultancy.co.uk. If your organisation is facing a challenge that you would like to talk over with us, informally and in complete confidence, please email us at info@sps-consultancy.co.uk or telephone Alison McCreath on 01784 895040.