A great article from Peter Smith at SpendMatters.
(I’m pleased to welcome Ashima Malik as a guest writer. Ashima is an experienced sourcing professional, now working as a Senior Consultant for Infosys BPO).
Ever been to a party and the sight of the sumptuous buffet confuses you with the variety of offerings or worse, kills your appetite?
I wonder if CPOs looking to try the remedy of outsourcing Sourcing & Procurement, face a similar dilemma – where to start? The conundrum of how to scope, approach and actually begin the process.
While there would be cases when the company is ready and going for full scale changes, there might also be a situation in which the central stakeholder, the CPO, is probably looking for a tactical partner to alliance on non-core areas of procurement such as a help-desk, eSourcing, Automated PR-PO processing, exclusive tail-spend solutions, etc. As a true Sourcing and Procurement domain expert, one might be itching to tell them what they are missing and how their ad hoc set up is impacting the visibility on spend and compliance, savings leakages, supply exposure and risk, etc .
However, it is also important to note that benefits of key value levers in Sourcing & Procurement outsourcing – spend reduction, unit-cost reduction and compliance – are reaped over a period of time. This is unlike other BPO initiatives where labor arbitrage is immediately apparent and benefit is realized upfront. And hence clients need to be provided the option of a piecemeal approach.
Or in other words, for clients who do not have the appetite for a five-course meal, it is prudent and important to know that they have the option of a light salad!
As a CPO, you don’t have to outsource your entire procurement function, or your end to end Analyze-to-Pay process. You can outsource on a category basis, or look at all sorts of other elements of the overall procurement process and range of tasks. The range of options is considerable. There is a growing trend to leverage managed services for very high value projects sourcing as part of consulting services. As per Everest Group’s research, the majority of organisations are more comfortable in outsourcing tactical processes, with an attractive payback – 5 to 10 times return on investment with a payback of around 12 months. Spending on these services is increasing at the rate of 20% annually.
Such a phased operational approach can:
a. be easier to get the internal buy-in
b. give you a flavor of outsourcing before considering a full-blown transition
c. let you assess the organisational readiness and initial response
d. evaluate the service provider’s performance with regard to SLAs
e. weigh RoI projections as per actuals
f. create the required operational discipline in the organisation
It is, however, important to ensure adherence to the following broad points to create the much needed internal buy-in and focus on the right issues:
1. Phased execution: During the initial execution, identify and implement quick wins that will help in early adoption and change management of the overall program.
2. Clear focus on time and quality (not just cost) which are generally ‘everybody’s problems’ and not just the objectives of the CPO
3. Flexible and Scalable: The processes should be able to adapt to changing demands and requirements of the customers and provides for fast onboarding
4. Clear RoI structure mapped to process ramp-up
5. Transparent monitoring of SLAs
6. Project to be backed with best-in-class technology to accelerate automation
7. Generate benefits through quick implementation
So, don’t shy away from reaping the benefits of procurement outsourcing just because you want to create the perfect enthusiasm within the organisation before bringing the subject to the table…remember, you have the option of salads too!
PETER SMITH – SpendMatters