Daily Archives: August 28, 2007

Outsourcing and Procurement Mastery

Accenture recently released the results of their recent study on procurement outsourcing on how procurement masters leverage outsourcing on the path to high performance which found that on 1B of controlled, normalized spend, procurement masters achieve 30% higher savings with costs that are 50% lower. Furthermore, the organizational challenges faced by procurement masters are often less constrictive or severe than those faced by midrange or low performers who often face functional silos, a scarcity of resources and / or talent, and a lack of authority, among other organizational barriers.

Accenture found that procurement masters approach the function more strategically and holistically and more, thus, more capable of effectively tapping the the depth and breadth of skills, capabilities, and expertise offered by a service provider. They also found that procurement masters engage their suppliers to a larger degree, frequently collaborating to create value versus blindly seeking the lowest price. Procurement masters are also technology leaders who utilize the outsourcing provider’s processing power to increase efficiency, make faster decisions, leverage and focus internal skills, and connect with suppliers and third parties. In short, they excel in procurement strategy, sourcing and category management, requisition to pay, supplier relationship management, workforce and organization, and technology and know how to seamlessly combine the various processes to achieve the maximum benefit.

Some of the more enlightening points made by the study are the following:

  • Procurement masters, who approach the function more strategically, look and think three to five years out when planning purchases for critical categories.
  • Procurement masters make widespread use of cross-functional sourcing teams for managing projects, formulating strategies, managing supplier selection, and implementing contracts.
  • Procurement masters excel at providing clear and documented buying channels to the end user (83%), whereas low performers do not (8%), and carefully define and consolidate their category-specific processes through buying portals.
  • Procurement masters often use outsourcing as a means of reengineering processes, ensuring that logistics, purchasing, and engineering all cooperate effectively.
  • Procurement masters leverage a world class provider’s investments in category research, innovation generation, new technologies and improved approaches.
  • Procurement masters take an intelligent and aggressive active approach to supplier relationship management.
  • Procurement masters excel in active workforce management (78%) whereas low performers do not (3%). They objectively measure existing competencies, make frequent adjustments to organizational skills to insure continual alignment with procurement strategy, emphasize ongoing training and linkages to performance metrics, and blanket competency development strategies across the procurement user network.