The Hidden Costs of Neglecting Category Management in Higher Education

For most colleges and universities, the stakes have never been higher. States are pulling back funding, budgets are staying flat or shrinking, and enrollment is down while the costs of goods and services continue to rise. Schools are being forced to make crucial financial adjustments to meet budgetary constraints.

Procurement teams play a key role in finding solutions to save money and operate more efficiently to avoid reductions in services and quality of education. Often working with limited resources, procurement teams are meeting these challenges by elevating their focus to become more strategic.

What is category management in procurement? By grouping similar products and services into categories, you can optimize sourcing, purchasing, and supply chain management. Category management in procurement offers opportunities to streamline processes consolidate and standardize purchasing, and reduce costs. Conversely, failing to do so can have serious consequences.

Introducing Risk into Procurement Categories

Procurement professionals do so much more than just buy products. They are business analysts focused on strategic sourcing and cost control, balancing institutional policies and initiatives, and managing risk. Without a category management strategy, risks grow.

Financial Risk

Grouping purchases into procurement categories provides you with a more comprehensive insight into spend visibility, without which you may overpay for goods and services or see inconsistent pricing and contract terms. And you miss out on opportunities for cost savings.

There is also the hidden administrative burden of neglecting category management. There can be duplication of effort and inefficient redundancies or the lack of data organization to guide optimal procurement decisions. This often leads to commodity buying based on the needs of the moment rather than long-term strategies, adding to costs and increasing administrative overhead.

Operational Risk

A decentralized purchasing process can result in poor decisions. For example, departments may choose products or services outside of approved vendor lists or buy from approved catalogs but fail to reach economies of scale. It can create a lack of standardization that hinders operational collaboration across departments or the broader campus.

Legal and Compliance Risk

A lack of contract management strategies can produce potential legal liabilities from non-compliance or inadequate supplier management and vetting.

Quality and Value Risk

Quality and value can be the victims of poor category management. Lacking the standardization and quality assurance created by category management experts can compromise the student, staff, and faculty experience.

Failing to effectively manage category spend can prevent higher education institutions from reinvesting in quality. Many schools are currently struggling with staff retention recruitment, and student enrollment. Inefficient category management leads to wasted spending that could be otherwise utilized to enhance the overall experience for all stakeholders.

Impact on Strategic Sourcing

Poor category management affects procurement teams’ ability to optimize strategic sourcing. It prevents colleges and universities from leveraging greater buying power through increased volume or supplier consolidation. With limited leverage with suppliers during negotiations, procurement teams may be unable to gain concessions on pricing or terms.

Active category management improves supplier relationships. As procurement team members gain expertise in specific categories, they can work more closely with suppliers to identify innovative solutions and find alternatives to better fit long-term goals. This experience helps to uncover and adopt best practices within a category to improve performance.

Direct vs Indirect Procurement Categories

Colleges and universities need to manage both direct and indirect procurement categories. Direct procurement includes items such as:

  • Laboratory supplies
  • Classroom supplies
  • Audiovisual equipment
  • IT hardware and software
  • Procurement related to specific grant funding

In other words, items that directly address a specific need or requirement are tied to the core mission.

Indirect procurement categories support the broader institution, not specific activities. For example:

  • Facilities maintenance
  • Transportation services
  • Legal and consulting services
  • Human resources
  • Marketing and advertising

Indirect spending typically makes up between 35% and 45% of expenditures. Since this type of spending impacts a broader cross-section, category management becomes even more essential.

Improve Your Category Management in Procurement and Lower Costs

E&I Cooperative Services is a member-owned, non-profit sourcing cooperative that can help you with category management. Offering competitively solicited cooperative contracts across a variety of categories, E&I leverages the bulk buying power of 6,000 member institutions to create more favorable terms and pricing.

E&I works exclusively in the education sector, and its category experts have the knowledge and experience to solicit competitive contracts to address the unique needs of colleges and universities. Additionally, our curated and categorized portfolio makes it easy to find the services and products that would best fit with your institution.

Contact E&I Cooperative Services today to improve category management in procurement and view available contracts by category.


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