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Organisations are under constant pressure to cut costs, improve revenue, remove waste, standardise processes, implement best practices, adopt best in class tools and technologies… the list goes on!
In a previous Retearn blog, ‘In praise of procurement outsourcing’, James Ball detailed some of the benefits and challenges of procurement outsourcing. In this blog we examine if Procurement Outsourcing could be right for your business to help you solve some of these pressures.
Start by answering the questions below to ascertain if it will help you achieve some core business objectives:
|Do you need to reduce costs?||Yes||No|
|Do you need to streamline, document or automate processes?||Yes||No|
|Do you have statutory reasons to manage your supply base efficiently?||Yes||No|
|Do you need to set up a procurement function and achieve immediate in year results?||Yes||No|
|Do you need a catalyst to transform your existing procurement team?||Yes||No|
|Would you benefit from installing a procurement culture throughout your organisation?||Yes||No|
|Do you wish to introduce latest/innovative thinking or technology to better analyse spend data and manage your supply chain?||Yes||No|
|Would you benefit from an expert managing your supply chain (even partially such as Tail Spend) and achieving benefits, while allowing you to focus on other key activities?||Yes||No|
|Does your corporate culture lend itself to an outsourcing environment?||Yes||No|
|Would strategic activities or projects benefit from additional expert resource and focus?||Yes||No|
If you find yourself answering Yes to more than 2 of these questions, then procurement outsourcing could be just the thing you fall in love with to help you achieve results.
There are however many who are fearful of outsourcing or are even thinking about bringing their outsourced services back in house, citing concerns such as:
1. Estimated savings not matching targets or expectations
2. Security, IT or Modern Slavery compliance concerns
3. Service levels under performance
4. Internal and external political or brand pressures
Except for number 4 these concerns can be mitigated. The process should start with a thorough business case and process to identify and appoint the right outsourcing partner, including contracts, SLAs and investing time in developing the partnership.
It’s also key to think about how long it will take to implement an outsourced model, and this will largely depend on the size of the organisation, geographic locations and complexity of the outsource (size of scope, delivery outcomes and any TUPE discussions with HR). A suggestion would be to introduce the outsource model by first testing the outsource provider under specific requirements (managing the tail spend for example) which will help reassure both parties on culture fit and the client on delivery of results. Once comfortable, it should be seamless to move to a partial or full outsource (big bang or over a sustained period)
When deciding to outsource procurement, even if perceived as an expensive outlay, it is worth appointing a procurement specialist and not a generalist, as the specialist will bring their experience, technology and a tailored solution – all of which you should expect, to increase the ROI multiple times. Look for a provider with a passion for their art, solid infrastructure, track record of the consultants and excellent industry knowledge.
As Procurement evolves to support an ever-widening remit, some of the modern core skills sought by businesses and found in experienced and modern thinking outsourced procurement consultants include; networking (internally and with suppliers), strategic thinking, spend analysis, digital solutions, marketing (of the procurement function), problem solving, integrity, flexibility, negotiating and of course achieving RESULTS
Finally, well designed and delivered outsourced procurement services can enable companies to concentrate on their core capabilities, confident that their purchasing is being effectively and profitably managed and surely that can only be good business practice?
James Ball is a consultant at Retearn and has extensive procurement, supply chain and operational experience across private and public sectors, including senior roles as the buyer of outsourced services for blue chip organisations, as well as delivering outsourced services