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Global myths of procurement outsourcing: Myth 3 - PO damages stakeholder relationships

Proxima
Nov 22, 2012 12:27:00 PM

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Successful procurement outsourcing hinges on a provider’'s ability to successfully engage with stakeholders.  You can have the world'’s best sourcing engine, but it'’s nothing if it doesn’t engage well with the business, and deliver what the business needs.

To us, successful business partnering is the most critical element of our work. Put simply, it is at the very heart of successful procurement outsourcing.  A quality procurement outsourcer knows this, invests in it, and places great importance on getting it right.

In fact, getting this wrong is the reason why internal procurement functions in some organizations are under performing - and why using an outsourcing model can offer a better service.  

Procurement outsourcing enables greater attention and focus to go on business partnering, as it allows division of labor and specialization.  One issue we see with a fixed internal team is that individuals tend to manage a sourcing project from end to end - from understanding the business need, to writing tenders, managing the sourcing process, analyzing responses, etc.  However, there'’s only so much one person can be capable of, or do at any one time.   Engaging and influencing a stakeholder requires a very different skillset to negotiating with a vendor.  

This is where an outsourcing model comes into its own.  It enables specialists to be used for each task.  So a business minded, commercially astute, communicator with excellent consulting skills will take on the business partnering role.  They will ‘'front'’ the process.  They then have vast support bubbling through from the rest of the business.  Support such as:

  • Analysts that understand the data, know how to manipulate it, and get insight from it

  • Deep category experts - and expertise that is up to date (as opposed to any in-house with expertise that is two-years out of date as the category has been looked at since it was last tendered)

  • Knowledge of what other organizations are doing

  • Negotiators

  • Market researchers

  • Appropriate technology

  • Legal counsel

  • Etc.

All of this means that you get a higher quality of service, at a much quicker pace, than a single internal person is able to achieve.  Furthermore, peaks and troughs in demand can be easily dealt with.

The truth is (and this is a surprise to many) it’s often easier for an external person to catalyze change than it is for an internal person.

Specialization allows an outsourcer to invest in business partners that are of sufficient caliber and capability to engage with stakeholders as peers.  They are able to challenge long held beliefs, business rules, ways of working, and approaches to technology, etc.  They then bring to the table the combined knowledge and experiences of the outsourcing business of what has worked well in other clients, what developments are happening in the supply base, what innovation is going on, etc.  And then they work with the stakeholders and the wider business to help drive change - and ultimately change behaviors.

As a result, the stakeholders receive a better, faster and more business orientated service than they do from an in-house team.

The truth: Any quality  provider of procurement outsourcing will invest heavily in business partnering.  As a result, the service received by the business goes up.  In turn, people will seek out procurement, when previously they did whatever they could to get around it.  And that’s because it becomes easier, faster, more insightful and better value for money with procurement’s involvement.

Now that we’'ve covered the stakeholder relationship concerns, in the next post I’'ll dispel the myths that some people hold in the areas of overall control and business risk...

*Click here to access the related posts: Myth 1: ROI comes from cost reductionsMyth 2: The ROI from procurement outsourcing is insufficient, Myth 4: PO results in a loss of control and increased risk and Myth 5: PO means off-shoring


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