Procurement Outsourcing Value Benefits Procurement Outsourcing by Michael

Creating Value Through Procurement Outsourcing in 2020

Each stage of the procurement cycle involves multiple stakeholders, variable processes, various departmental goals and objectives and copious amounts of administration. Any value, initially attached to a transaction or contract can be systematically eroded from the business as the process grinds slowly and painfully onwards to an eventual but unsatisfying conclusion. But indirect procurement outsourcing will ensure the value not only remains but flourishes.

Value Through Procurement Outsourcing in 2020

Procurement outsourcing constitutes a growing trend of corporate procurement strategies. In fact, research has suggested that major companies will likely expand the scope of procurement outsourcing in the coming years.

Procurement outsourcing solutions can work independently, or alongside your;

  • Chief Supply Chain Officer
  • Head of Category/ Category Manager
  • Logistics Manager/ Director
  • Procurement Manager/ Director
  • Procurement Analyst
  • Sourcing Manager
  • Chief Purchasing Officer
  • Head of Procurement
  • Directors of FP&A
  • Managing Directors/ Owners
  • Finance Manager/ Director
  • Financial Controller

    • How to Create Value Through Procurement Outsourcing in 2020

  • Enact long-term, not short-term, thinking and collaboration.
  • Tap into supplier knowledge, experience, expertise and creativity.
  • Buying power and volume aggregation is achievable (particularly for indirect categories).
  • Marketing departments can utilise some aspects; if they know about it!
  • Collaboration and strategic partnerships create a bigger opportunity.
  • True partnerships enable a win-win situation and where some value can be hidden.
  • Additional staff motivation should be explored (travel, discounts etc.)
  • Access scale and capabilities they don’t have in-house.
  • Proactivity, flexibility, innovation and contribution to the wider business.
  • Reciprocal business and potential revenue generation relationships are a possibility.
  • Working alongside providers as business partners, rather than transactional relationships.
  • Closer supplier relationship management (SRM) often mean that their innovations immediately contribute to your product and revenue.
  • Flexible, outsourced, business agreements based on trust, transparency and fairness.
  • Outsourcing Indirect categories frees up the time for Direct procurement to optimise their strategically critical activities.
  • Corporate social responsibility (CRS) is easier when you’re viewing with an impartial and non-emotive eye.
  • Focus on value creation and cost reduction will naturally follow (it’s a win-win scenario).

    • Picking the Right Categories for Procurement Outsourcing in 2020

    Picking the right categories for procurement outsourcing rests on two main scenarios. Firstly, what is the strategic importance of the category? Some categories may be a distinctive source of competitive edge for the business, or of such significance to output or customer requirements that outsourcing them would pose too much of a risks to the business. One of our favourite mottos is, “If it makes you money keep it in house, if it costs you money.... OUTSOURCE!”. Indirect categories are therefore ripe for outsourcing.

    Secondly, can the company manage the category effectively in-house? Effectively, in theory, means category expertise, managing the size and complexity of the spend, considering the business’s relative influence in that particular market and the capacity to manage the end-to-end procurement process. In the case of indirect categories, companies should ask themselves if another organisation is in a better position than them to manage that category. Again, indirect categories are ripe for outsourcing.

    Delivering cost reduction, efficiencies & value through robust outsourced indirect procurement

    The success of any outsourcing agreement is often shaped by the groundwork and implementation of the arrangement. That, in turn, depends on establishing strong relationships between the outsourced procurement provider and the wider organisation (and stakeholders across various departments) and on tight management of the process once it’s underway.

    To build an effective relationship between the provider and the wider organisation, the company must ensure that the proposed agreement meets internal requirements and departmental goals and that the business case and justification for procurement outsourcing is understood across all departments. Buy-in and the right mind-set must also be present from influential stakeholders or the outsourcing project can be frustrated and fragmented before it even gets off the ground. Companies also need to ensure they are treating their outsourcing provider as a strategic partner.

    Whilst the opportunities are significant, so are the risks, if it is not run well. Procuright can help you design and implement a procurement strategy that meets your business needs and mitigates risk along the way.

    We're strategic thinkers and hands-on implementers, familiar with all the latest supply chain tools, techniques and technology. But unlike most outsourced procurement functions, where the deliverable is often a recommendation, our team and partners will roll up their sleeves, get stuck in and implement the right solution.

    "To build an effective relationship between the provider and the wider organisation, the company must ensure that the proposed agreement meets internal requirements and departmental goals and that the business case and justification for procurement outsourcing is understood across all departments. Buy-in and the right mind-set must also be present from influential stakeholders or the outsourcing project can be frustrated and fragmented before it even gets off the ground......................"