Procurement - Inhouse or Outsource

[David]

Is procurement a strategic part of business, or a cost centre that can be outsourced?

If the task of procurement is to only manage the purchase to pay cycle, with a bit of cost management thrown in, then I propose it is non-strategic and should/could be outsourced.

For procurement to be, and to be seen to be strategic to the company, it should be actively involved in all aspects of the supply chain, from planning of plant and products through to the disposal.

Procurement has to sell itself to the organisation, and deliver value in the same way a vendor has to sell itself to you.

Comments please!

[LANCE]

Yes, procurement is strategic. However before anything else is done in an organisation, Procurement must have policies and procedures that gets the buy-in of top management. Procurement has always been seen as a non-value add unit of any business. It is the reposnsibility of the procurement professionals to change that perception. How can that be done?

1. Firstly getting buy-in from top management and the entire organisation;
2. Change organisations perception of procurement;
3. Have clear policies and procedures;
4. Workshop the organisation on policies & procedures;
5. Monitoring compliance of policies & procedures;

Procure through cross-functional teams & have teams accountable. Therefore organisation will see the value add that Procurement contributes to the bottom line.

[David]

Good points made by Lance.

However, if the organisation has not viewed procurement as strategic up to now, it is very unlikely to start doing so tomorrow.

So, like The Beasty Boys sang : You have to fight ...for the right ...to party. And like my previous sales director use to say " Pick the fights you can win"!

Picking the fights you can win require that you have relevant information about your targer and the skill and knowledge to use this information to build a business case for procurement.

This business case is the plan that what will win the battle for procurement.

When planning a potential sale (in this case we sold high end supply chain solutions) we followed the following steps:
1) Targeting
2) Initial calls and qualification
3) Executive sponsor development
4) Value assessment and presentation
5) Negotiate and close
6) Account expansion

Seeing that procurement has to sell themselves to the organisation (procurement's clients) it make sence to follow a proven sales strategy.

So, even though you know who the client is (or not?), the steps are valid. Over the next few weeks I will be posting how I see this process can support procurement is selling themselves to the organisation, and sharing in the reward of a job wel done.

Next week we will look at targeting and initial calls and make this applicable to building a world class procurement organisation.

a) Identifying your in-house clients
b) Identifying the key stakeholders
c) High level value assessment
d) High level value presentation


Regards

[Izak]

Some very good and valid points made by David and Lance.

Have to agree here, definately strategic and I think it has alot to do with the industry you are in as well, whether outsourcing it is an option or not.

[Alan Low]

From Purchasing Index's perspective outsource Procurement is on the increase, particularly in the UK. In RSA most of our clients are understaffed (and underskilled) to handle all the myriad spend categories that they are taking on as their remit broadens and deepens in their organization. Surely it may be opportune to look into using outsourced skills to handle the "rats and mice", especially if you have a good handle on these spend types.

[Jacques Fourie]

.. when we refer to "outsourcing" we should, in order to clarify better, rather refer to it as out-tasking i.e. certain procurement processes. I do not think that any corporate in SA is ready to outsource it's entire procurement function (at this stage)

[Izak]

Could you elaborate on that Jacques as I personally think that they are
Also what services do you provide as you web page is not yet up and running...

[Gregg Barrett]

Have to agree with you on that one Jacques. I have seen organisations mostly outsource certain spend categories, but not the whole function, at least not in South Africa. The problem is that most firms dont have detailed spend information across their organisation. When a firm does not have this detailed information outsourcing is premature as in essence you are making a decision based on something you have no knowledge on. This will make it difficult if not impossible to qualify the decision to outsource and further to this being able to validate "savings" from outsourcing simply wont be possible, as you wont have the necessary benchmark data, that is accurate data on the state prior to outsourcing. Most firms dont even have a handle on their contracts (had to drop that one in for you) so having a complete and accurate picture on procurement, its activities and all its spend is a pipe dream still for most.

[Jacques Fourie]

Originally Posted by Izak

Could you elaborate on that Jacques as I personally think that they are
Also what services do you provide as you web page is not yet up and running...

Hi Izak: the site is done and will be relaunced today: here is the active link to the website:
http://www.saoapps.com/wanama%20solutions

[Izak]

Thanks Jacques, will go and check it out.