E-Procurement solution

Preparing a Procurement Outsourcing Project

Published By

Jeremy Ferrer

Procurement outsourcing project and purchasing function

The activities called” core business ” are generally considered strategic and therefore not transferable. What about for a procurement outsourcing project ? How can a company transform its Purchasing activities without becoming virtual? How far can we go in the industrialization of purchasing approaches?

“It is from identity that difference is born”

The purpose here is not to define what is the core business, because this concept depends in particular on the history, culture and positioning of the company. Thus, there is a common tendency to consider that The Purchase function is a support activity, not a core business and can be outsourced.

However, in the same sector of activity, the automotive industry in particular, some will consider that Purchase function is a core business, where others will consider it not to be a core business.
This shows that this concept is relatively subjective, specific to each company. Considering that core business activities cannot be outsourced or relocated is only a partial answer.

Maintaining its competitive differentiators

The ability of the company to maintain its factors of competitive differentiation and to maintain consistency at the same time Organizational and managerial becomes much more decisive.

The real challenge for many companies is that today it is undoubtedly necessary to consider industrialization approaches on a wider scope of activities.

This is in order to better respond to a competitive context requiring more flexibility and reactivity in an international environment. However, to do this, it is necessary to adopt more structured approaches to business activities, which are valued, and therefore more visible to the end customer.

It is more a question of knowing how to control the risks associated with a project. procurement outsourcing than knowing why we're doing it.

Securing the procurement outsourcing process

It is the ability to secure the procurement outsourcing process over increasingly broad areas that provides a real competitive advantage.

Tail Spend procurement outsourcing then becomes a real business process, a factor of differentiation and competitive advantage.
Not considering it means depriving yourself of new performance levers by remaining limited to supporting activities.

Outsource over a wider scope without anticipating and without controlling risks, means exposing yourself to strong probabilities of loss of continuity or quality of service, which are strongly sanctioned by the customer.

The real question is therefore more about how than what to outsource:

What are the risks (financial, commercial, operational, legal, social) induced if procurement outsourcing focuses on a wider scope of activity and, above all, what is the organization's capacity to control them and cushion their impact?
It is not a question of wanting to eliminate risks, which are inherent in transversal and complex projects, but of reducing them.
Accelerate the outsourcing Tail Spend procurement, it means generating more risks. The company must therefore put itself in working order by defining its risk policy and the structuring of its management system more generally;

What is the capacity of the provider or from the host country of the company's activities to control the factors of competitiveness, in particular the quality of service?
This means defining, in advance, the performance levers on which the service provider will be evaluated or the country of relocation selected. Finally, this implies, where appropriate, being able to go back if the capacity of the provider or the host country was not verified and to reinternalize, or even relocate activities, limiting additional costs and controlling risks;
What is the capacity of the organization to manage this type of Purchasing project to secure the achievement of the above objectives?
This requires having industrialization methodologies in-house that make it possible to make the right choices, based on objective criteria, to manage projects, which are complex because they affect the very structure of the organization and are inherently transversal.

Place the procurement outsourcing project within a strategic vision

To maintain its identity, the company must not refuse the acceleration of approaches tooutsourcing Tail Spend procurement, but place procurement outsourcing within a strategic vision and give yourself the means to manage it.

Outsourcing without being distorted means having ambition and managing with pragmatism: you have to be ambitious, because projects of outsourcing Tail Spend procurement are a sustainable driver of competitiveness, and it is necessary to be pragmatic, because they are risky. But above all, it is necessary to promote the internal adherence of teams, as part of a new management of the relationship with service providers.

Indeed, for the company to maintain its coherence and identity, it must thoroughly review its management method.

The management mode is becoming polymorphic and is no longer based solely on hierarchical, geographical or numerical criteria.

Therefore, the company sets itself results objectives and no longer only resource objectives, which sometimes leads to a profound questioning of management methods (processes, information systems). The new manager must be able to:

Managing third parties in the context of outsourcing activities

Remote manager in the context of offshore activities

Manage internal service providers in the context of shared activities

Preserving its identity and ethics

Maintaining its identity and ethics is above all about remaining a corporate citizen and responsible company.

Is it contradictory with a procurement outsourcing project ?
At the national level, the global competitiveness of businesses is essential.

Management choices are also the responsibility of corporate governance.

Indeed, such operations are both destructive and create jobs.
Everything depends on the analysis perimeter selected. So lOutsourcing procurement by a large number of companies has resulted in the establishment of leading companies through the transfer of activities.

The relocation of activities makes it possible to relocate jobs to areas at a lower cost and to contribute to the development of markets with greater growth potential and therefore to generate new needs.

So the real question is not to avoidoutsourcing Tail Spend procurement through its various forms, but to put yourself in a position to take advantage of them and to understand the problem on a much wider scope within the framework of a global organization.

Read: What structure should be put in place for functional specifications?

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