Sourcing and Procurement
How CPOs Should Choose the Right Procurement Model and Vendor’ to ‘strategic’ sourcing
The Chief Procurement Officer’s (CPO’s) role has evolved incredibly, thanks to disruptive technology and business models and the availability of tools that can deliver data-driven insights.
The role of a procurement manager has matured over the years. From merely being a purchase manager to being a decision driver for the enterprise, CPOs now rely on data-driven insights and leverage data and AI to transform entire processes, as well as minimise losses and drive better savings.
The focus has shifted on procurement strategies that can enable CPOs to make a value addition for the business. Outsourcing has received increasing importance, and it is no longer limited to some functions. With increasing acceptance, even critical functions are being outsourced Traditional setups did not offer flexible and scalable resources. But now, it is a veritable buffet out there — select the categories that need to be outsourced.
Choosing the Right Procurement Outsourcing Model
To choose the outsourcing model, CPOs can start with a phased approach by outsourcing a non-essential function to take the litmus test of whether the pick has been correct. Thus, before taking the plunge and outsourcing a crucial function, it is important to ensure that the results have been optimal and is in alignment with the goals.
Start with functions that deliver quick benefits through procurement, and then take a call, based on the procurement vendor’s performance.
Balancing both internal resources as well as outsourcing partners, CPOs optimally use available resources for maximised savings. However, finding the right partner that delivers on business goals is crucial – especially if more than a handful of functions are to be outsourced.
The ideal procurement outsourcing vendor
Various options are available for different functions as outsourcing organisations mature. Look for the following while picking a vendor for procurement outsourcing:
Value addition The outsourcing model should have AI-based capabilities and must offer comprehensive services for sourcing and procurement. With innovative techniques to reduce the burden on internal teams, the vendor’s tools must clearly drive value.
Flexibility Outsourcing organisations also offer customised services that are adaptable to market demand. Devise an innovative model that can successfully generate results and offers flexibility.
Market insights Market insights are crucial in maintaining a competitive edge. This ensures that the seller not only compares and checks the costs between two products, so that they offer the optimal price.
Procurement best practices With multiple suppliers, the outsourcing partner should be able to identify and assess their performance while maintaining track of their engagement. Managing faults, ensuring invoices are maintained, and keeping track of inventory while keeping the demand and supply in mind is indeed a daunting task. Good analytical skills can be rewarding here.
Innovation Constant innovation is the only chance of survival today. Cloud-based tools have become immensely useful as they can relieve the burden on operations and spare the team from clerical work to focus on developing strategies to improve efficiency.
Additionally, the outsourcing partner needs to be innovative to ensure that the right product is delivered, with a strategy that is aligned with the company's objectives, rather than offering one-size-fits-all solutions.
Transparency A transparent procurement process gives less opportunity for fraud and other wastage to seep in. Additionally, it ensures that the costs of regulatory compliances and litigations are kept to a bare minimum.
Audits Constant inspection and audits are a key responsibility of any procurement manager. To reduce losses on regulatory penalties, the outsourcing vendor must be vigilant and should be able to keep inventory under check.
Procurement solution with capabilities While choosing a procurement software, ensure the following:
- A well-defined scope
- Check whether the software offers end-to-end solutions from purchase to pay options
- Ease in integration with other services
Benefits of procurement outsourcing
Today, outsourcing is no longer limited to merely transactional and tactical services; it also involves strategic services. Here's why CPOs should consider outsourcing procurement activities:
- Acquire high level of expertise:
While there has been a shift in traditional BPMs, outsourcing has evolved and procurement managers can leverage their expertise to gain market insights and maintain a competitive edge. Harnessing expertise, scalability, and a variety of tools and resources of independent organisations can assist the company in sustaining competition.
- Focus on core competencies:
With more time to spare, managers can focus on core competencies and 'managing' resources, when the details are taken care of by the outsourcing partner. The number of suppliers in the market can be high and choosing the best pick for the organisation is not easy. Outsourcing partners possess the right skill sets for this and have an updated pool of knowledge about the market.
- Track compliance:
When record maintenance becomes easy, CPOs can easily track whether compliance standards — internal and external — are being met. Additionally, keeping track of any deviation or irregular pattern becomes relatively easy as they get highlighted faster.
Thanks to analytics and easy availability of actionable data, core business functions of procurement can be outsourced.
As organisational structures become complex and specialisation takes on added significance, outsourcing might be the only answer to survive in changing market scenarios and to reap long-term benefits from the procurement initiatives. Therefore, it is imperative to look for leaders in procurement outsourcing who can streamline processes and grow a competitive edge.