From the December 2022 print edition
Procurement as a service is an outsourced procurement model that combines technology, staff, and expertise to handle a portion, if not all, of your organization’s procurement function.
There are several models available that include pay-as-you-go, on-demand services, scale to suit individual businesses or allow the ability to leverage expertise. These services are often affordable and do not require any extra technological skill.
If you are thinking about implementing this type of solution, then you should be looking at how you
Gerald Ford is director, supplier development, with Kinetic & CEO of QCsolver Supplier Management.
handle your indirect procurement.
This typically involves purchases of items that are essential for day-to-day operations but don’t directly contribute to the company’s bottom line.
Keep in mind that you are not a pioneer. Many services exist that companies use to outsource certain job functions. I have seen it done for HR, marketing, sales, and IT.
HR functions that are outsourced to a service often include payroll processing, employee benefits administration, and other business needs unrelated to day-to-day company functions. Use a similar methodology to come up with solutions for your procurement-as-a-service challenge.
What I haven’t seen as much is a similar offering for procurement. Perhaps it’s because people in the profession have a can-do attitude? Maybe they don’t believe that they can afford a service that they truly need? It could be that they fear losing their job. or looking in the wrong areas.
I suggest that moving certain tasks to others is the smart thing to do. It frees up time to work on value-added tasks. It allows the opportunity to engage with your internal stakeholders rather than get encumbered with administrivia.
If you are interested in learning more, where do you start? The first thing to do is determine where you might either have pain points or gaps. Pain points are easy to recognize as they are those areas that everyone complains about. Gaps are trickier. Perhaps your staff is lacking the knowledge, skills, or experience. Maybe your ERP system is old, outdated and was installed with every other department in mind. Or worse yet, you still use Word and Excel.
You could try to get your staff trained but that takes time. The risk you take when doing the training is that it might not provide you with the desired outcomes.
Procurement’s problems are ever evolving. The market is in constant change. There are solutions, but you must remember that they are new or often not well known. It took years for outsourced HR functions to take hold.
To be successful in your search for the ultimate procurement as a service, you will need to take a few limited risks. You must focus your search in order to find and develop existing or new solutions, prove them in the real world, then develop a contract to make them a lasting reality.
You will need to explore existing solutions, potentially create a procurement process start-up, in-residence program and determine how to redefine an approach that allows you to have a positive impact on the future of your organization. Here are a few suggestions to get you on your journey:
- Identify baseline needs and important issues from your internal stakeholders. Where are the gaps and pain points?
- Embrace the challenge/need for a solution-based model.
- Energize local solution providers.
- Implement a supply chain residency program to develop simpler software solutions for existing challenges.
- Agree to pilot projects with potential solution providers.
- Give your staff a chance to take 10 per cent of their time in order for them to review options when it comes to utilizing procurement as a service.
- Allow responding companies to be creative when responding to a request for information.
What to consider
Here are some areas to think about regarding procurement as a service. Firstly, look at your vendor management and onboarding process. This area of the procurement function is often managed by accounts payable or delegated to other departments when you are in a decentralized environment. Using procurement as a service allows you to delegate the often time-consuming and error-prone process. This would give your staff time to monitor and supervise the outcomes versus actually doing all the work.
There are other administrative tasks where procurement as a service might come in handy. The procurement world is still overwhelmed with paperwork. Most of it is critical to the smooth operations of various departments. Examples include the maintenance of contracts, updates to insurance certificates, verifying workplace insurance coverage, conducting trade and work references, and repetitive ordering.
These functions take time. In fact, if you have a base of over 200 suppliers, the time taken to keep the above up to date and functioning may take 25 to 40 per cent of your staff’s time. We are now witnessing an evolution in our profession and the next step belongs to you. SP