Redefining procurement series: Procurement outsourcing (part 3) – your options
Oct 27, 2011 9:31:00 AM
Last week's post, in the Redefining Procurement Series, discussed why you should even consider outsourcing procurement. The post finished with the challenge most procurement teams face when looking to drive maximum efficiencies and value out of indirect expenditure. This post will take a comparative look at the options available for managing indirects effectively.
Procurement teams are coming under increasing pressure to deliver more than just year-on-year savings back to the business. Deliverables such as risk mitigation, process re-engineering, contract innovation, compliance, spend under management, internal communication, etc. are being demanded (and, to a degree, expected) by various business stakeholders and senior executives.
As such the challenges mentioned in our last post coupled with the constant need to engage with internal stakeholders often results in the assembly of large teams - underutilised if each team member specialises in a particular category, underperforming if they generalise, underappreciated if they do not perform effectively and commercially alongside their stakeholders.
With this in mind, let's compare the three options available to your organisation looking for managing your indirect expenditure more effectively: Keep in-house, bring in interims/consultants, outsource to an external provider.
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All options have their pros and cons. The arguments for and against outsourcing, in particular, are heavily influenced by your organisation's own unique Internal factors (company structure and model, corporate values and beliefs, culture, in-house capabilities, past experience of outsourcing, etc.) and external factors (political, social, economic and technological factors, corporate social responsibility, etc.).
However, the arguments FOR outsourcing are many and largely outweigh the pros of keeping the function in-house. Yet, many CFOs and senior executives still remain unconvinced, or perhaps more likely unaware, about the benefits that procurement can deliver, let alone what is achievable on top of this through procurement outsourcing.