Reducing Misclassification in Procurement: Modern Category Management and the Role of External Workforce Programs
The way procurement teams operate is evolving. As businesses increasingly rely on flexible talent, category management and accurate supplier classification are becoming more important than ever. Yet, many procurement teams still rely on legacy systems that don’t reflect today’s workforce landscape. This can lead to suppliers, vendors, and external workers being placed in the wrong categories—ultimately creating inefficiencies and compliance risks. To modernize, procurement functions should leverage external workforce programs and build stronger partnerships between procurement, business stakeholders, and suppliers.
Why Procurement Needs to Evolve
Today, there’s a noticeable divide between traditional procurement teams and those actively modernizing.
In many cases, legacy procurement teams focus primarily on cost savings and have limited engagement with the business beyond contract execution. These teams often work in siloed categories, creating “grey areas” where misclassification happens—especially with suppliers that deliver cross-functional services, like a consultancy offering IT, marketing, and AI solutions.
The issue isn’t just about outdated systems—it’s about mindset. Some suppliers are still classified based on criteria set years ago, despite evolving their service offerings. As a result, organizations face increased risk, limited visibility, and reduced flexibility.
To avoid these pitfalls, procurement teams need to reframe how they define, manage, and engage with suppliers. This includes recognizing that categories aren't always clear-cut and that suppliers may play roles across multiple parts of the business.
How to Modernize Procurement
Modern procurement is about collaboration. By working more closely with business leaders and suppliers, procurement teams can align sourcing strategies with organizational goals and respond more dynamically to changing needs.
To begin the transformation, procurement teams can consider the following approaches:
Leverage external workforce programs: These programs go beyond traditional contractor or consultancy models. They offer structure, visibility, and compliance for a range of external talent.
Rethink supplier categorization: Suppliers often provide services that span multiple business areas. Flexible categorization—or even creating hybrid categories—can help better match them to the needs of the business.
Digitize procurement processes: Implementing tools like smart intake forms and decision trees helps ensure requests are routed to the right suppliers from the start. This reduces manual effort, supports compliance and improves the experience for internal stakeholders.
Invest in continuous supplier assessment: Suppliers’ capabilities change. Regularly reevaluating their fit across categories allows procurement to make more informed decisions and adapt to emerging business needs.
Business Value With External Workforce Strategies
The external workforce—including freelancers, independent contractors, and project-based consultants—is a powerful resource. Globally, this population now exceeds 1.57 billion workers and includes professionals with deep expertise in strategy, technology, operations, and more. From an organizational perspective, external workers now represent more than 47% of the average company’s total workforce, underscoring their critical role in business success.
External workforce programs help organizations tap into this talent in a scalable and compliant way. They offer structure around engagement, classification, and performance, helping procurement teams deliver savings, agility and innovation.
In an environment of headcount freezes and cost pressures, flexible workers offer a strategic advantage. When integrated effectively, they become an extension of the organization—helping businesses move faster and adapt more easily.
Looking Ahead: How to Overcome Category Misclassification?
The most effective procurement teams are moving beyond cost control to become strategic partners to the business. As the gap widens between traditional procurement practices and the way businesses operate today, success will hinge on closer collaboration, smarter technology use, and more flexible supplier classification.
By aligning supplier capabilities with actual business needs—and leveraging external workforce programs—procurement can reduce misclassification risk, improve agility, and deliver greater long-term value.