One of the greatest benefits of procurement outsourcing is that it can provide the much-needed impetus to overcome the greatest hurdle to procurement transformation: change management. Outsourcing procurement — or any business function — entails a significant investment in terms of time, resources and culture. As such, outsourcing any business process typically captures senior executive attention and support.
Top executive support is often lacking from internally managed improvement initiatives such as procurement transformation that are often viewed as functional programs and frequently lack full support or attention across functions or from frontline employees.
Procurement — or what many call “spend management” — is one of the few processes that supports and crosses nearly every function across the enterprise. Depending upon the good or service being purchased, specialists from a wide range of functions — from engineering for
direct materials, to marketing for print and advertising spend, to IT for hardware and software purchases — can be engaged in defining purchase specifications, placing orders, and interfacing with external suppliers. Making improvements or changes to this process or engagement
model can often meet resistance from these stakeholders – not to mention within the procurement
function itself.
Other challenges to procurement transformation are resource constraints, a lack of real-time visibility into spend, and difficulties rolling out best practices across broad areas of enterprise spend. Problems can arise from issues that include decentralized procedures, manual
processes, inconsistent nomenclature, lack of spend coverage, limited expertise and insufficient organization clout. Procurement organizations often struggle to provide credible data at the right time and at the right level of the organization to influence behavior. From a resource perspective, the challenges of constantly chasing after spend that has already been committed result in a focus on compliance rather than strategically shaping the company’s spend as it occurs. Commonly,
internal procurement initiatives result in gaps between savings identified and savings realized, with the result of slower than desired time-to-value.
In our view, the key to overcoming these challenges can be found in an efficient mechanism to roll out tools and processes that enable better business intelligence, and to do so in a manner that will not exhaust the finite budgetary and human capital resources available to procurement organizations. If such a mechanism can be put into place, the role of procurement can shift to an
increased focus on overall category management, supplier performance management and innovation. In this scenario, procurement would be able to focus its talent on shaping more strategic relationships and addressing areas of unique but differentiating spend ranging from the sourcing and management of complex services such as capabilities sourcing or systems
integration on the services side to improved supply chain management in environments such as manufacturing. Achieving these aspirations relies on effective change management — influencing how the culture of the enterprise approaches key requirements definition, decision making, risk analysis and collaboration across its supply and services chain. Internal procurement often faces credibility challenges and is perceived as bureaucratic with inconsistent service levels. This often
provides a roadblock to a more strategic role, and procurement organizations need to dispel this
perception.At an executive level, procurement must develop and nurture relationships across senior management that will ensure that procurement has a meaningful seat at the table in planning and decision making. At an operational level, procurement must be able to ensure that
processes are executed efficiently and consistently to provide a high level of reliability, accuracy and customer service — a set of activities that requires significant training for processors and end users, systems and process support, and monitoring of processes to ensure that they are achieving critical service levels