The goal of developing a core list is to negotiate aggressive, fixed pricing on the majority of the spend in a given category. Annual core list rewrites are a major aspect of maintaining savings as "churn" or turnover in many categories results in many previously high volume items not being purchased and new high volumes items being added to what is purchased.
How it works
Core list rewrites function by pulling together the items with the highest spend and usage, negotiating fixed pricing with deep discounts, and annually refreshing the list to make sure the list captures the majority of the spend in the category and reflects current buying patterns. Some suppliers will offer a core list that is fixed over the life of the contract, knowing that over the life of the deal there will be a churn in purchases and changes in buying patterns will change. This means that in years 3 to 5 of a contract with a turnover or churn rate as low as 20%, very few highly discounted core items will be purchased and instead the supplier will see a higher margin pricing these items at non-core rates.
By rewriting the list annually to reflect current purchases, you can ensure the core list stays relevant and covers the majority of the spend in the category. This will provide the highest level of discounts and can drive year over year savings as new items are added.
- With a properly developed core list, you can obtain discounts that range between 30%-60% per item
- Through strict annual reviews and rewrites, you could see year over year avoidance of lost savings of 10%-20% even with a churn rate as low as 20%
- Core List Rewrites prevent supplier margin creep created by the changes in buying patterns and ensures pricing on the majority of your spend is competitive
CoVest and Core list
Rewriting core list internally may require more time and resources than your company has available. The amount of effort it will take your organization to focus on each and every item your company handles may seem daunting and that is without factoring in that you should do core list rewrites annually (which is highly recommended). However, CoVest Sourcing Network relieves our members of this strain. Our team spends far more time managing the specifics of each category than our members can afford, as the spend levels in these categories are relatively small for each member, but significant for the combination of CoVest's member companies.
CoVest rewrites core list as often as necessary to ensure a tight fit with current member company spend patterns. We continually identify key, high volume items and make sure those items enjoy fixed, aggressive pricing. CoVest rewrites are different in that, our core list is a combination of high volume items across all members and high volume items unique to each member. This is beneficially because the more members we have, the more spend per item we have, and the better the level discounts we can negotiate.
Read next blog: Price Auditing: The Perfect Way to Round out Any Category Management Process
Read our blog on the previous step in the Category Management process, The Benefits of Lost Savings Opportunity Reporting or start our Category Management series from the beginning, Category Management Essentials.
Begin your category management journey by downloading a Savings Report Sample.