CIPS Level 5 Advanced Diploma in Procurement and Supply L5M6 CIPS Study Notes

In category management, grouping is most effective when based on similar usage characteristics. This means materials or services are categorised by how they are used within the organisation, rather than simply by spend or supplier. For example, in healthcare, personal protective equipment (PPE) forms one category, while surgical instruments or bedding may be separate categories. This approach ensures that category managers have a clear understanding of functional requirements, demand patterns, and value drivers. Grouping only by spend might overlook strategic importance, while grouping by supplier or geography can miss opportunities for cross-functional efficiencies. Usage-based categorisation allows for tailored procurement strategies that align with business objectives and ensure effective stakeholder engagement. It also enables organisations to identify synergies across business units and improve supplier management. By aligning categories to organisational needs rather than just financial or structural dimensions, procurement creates more value and achieves better alignment with corporate strategy.

The categories most likely to be outsourced are Marketing services and Facilities Management [FM]. These are examples of indirect spend categories where external providers often offer specialist expertise, cost efficiency, and scalability.

CIPS identifies five indirect categories frequently outsourced: Marketing, Facilities Management, IT/Communications, Human Resources, and MRO [Maintenance, Repairs, Operations]. Outsourcing these allows organisations to focus internal resources on core competencies such as manufacturing or R&D.

Raw materials, warehousing, and operations are typically core to production and therefore managed internally or strategically sourced, rather than fully outsourced. While warehousing may sometimes be outsourced [3PL], it is not listed among the primary categories in the study guide.

Outsourcing decisions must balance cost, risk, and strategic importance. For example, outsourcing FM reduces overheads while ensuring professional management of buildings and services, whereas marketing agencies provide creativity and campaign expertise.

[Ref: CIPS L5M6 Study Guide, pp.46–47 – Categories commonly outsourced]

Contract leakage refers to the difference between the benefits forecasted before awarding a contract and the actual benefits realised during its execution. For example, savings predicted during tendering may not materialise due to supplier underperformance, scope creep, or poor contract management. This phenomenon highlights the importance of post-contract management and continuous monitoring of supplier performance. Category managers must ensure that expectations set during procurement are followed through by tracking delivery, compliance with terms, and value creation. Tools such as KPIs, SLAs, and audits help minimise leakage by ensuring accountability. Ultimately, failure to address leakage can lead to financial loss, reduced trust, and missed opportunities for improvement. By focusing on contract outcomes as well as initial savings, procurement ensures that strategic objectives are consistently met.

CIPS highlights that damage to brand reputation and financial loss are two major risks of failing to manage supply chain risks effectively. Legal issues such as lawsuits arise from illegal activity, which is separate from general risk exposure.