Research excerpt: Perceived benefits of procurement outsourcing
Jul 17, 2012 9:32:00 AM
In this excerpt from our Enhancing and Redefining the Role of Indirect Procurement series, we look at the benefits of procurement outsourcing (PO) in the minds of CFOs and CPOs and how both communities perceive PO as a strategy to support the wider business.
The below chart shows the key benefits of outsourcing procurement and the respective level of importance, as seen by the CPO and the CFO, attached to each.
Click image to enlarge
Immediately noticeable is the very high importance attributed to many of these potential benefits. Secondly there is a strong focus to enhance the strategic capabilities of the indirect procurement function with the majority of potential benefits listed above looking at improving the way the rest of the organisation interacts with the indirect procurement function or how it can increase process compliance.
By far the most important potential benefits, rated as being even more important than gaining access to cheaper goods and services, are:
- Cheaper processing - The primary driver for outsourcing transactional activities around PO and invoice processing is often straightforward process cost reduction. However, outsourcing transactional activities can also be part of a drive to introduce best practice and greater process compliance across the organisation.
- Improved ability to enable a change in indirect procurement across the organisation - A large number of CFO respondents are looking for a complete change in how indirect procurement operates in their business and how procurement can influence behaviours surrounding this element of business expenditure.
There are some strong differences of opinion coming through - for example, CFOs see wanting cheaper goods and services (90%) as more important than CPOs do (74%). And CPOs see procurement outsourcing as an opportunity for the internal team to focus more on strategic issues (81%), whereas only 67% of CFOs see this as important. Both of these suggest that many CFOs are taking too simple a view on the purpose and possible benefits of procurement outsourcing.
How can procurement shift this perception and position itself within the business at a higher level, where it delivers real business value? Should you simply stop doing the tactical and focus more on the strategic?