Considering the Broader Intersections of Services Procurement with Purchasing and Risk Management
Categories: Innovation, Risk Performance and Compliance, Supplier Management | Tags: Enterprise Irregulars, L2, Process and Best Practices
Having been in recent discussions with a number of practitioners and consultants engaged in procurement compliance and risk management areas, it would seem to me that services procurement intersections with broader purchasing and supply chain activities are becoming better known. Indeed, services procurement (including but not limited to contingent labor) has many touch-points with existing procurement and supplier management processes. But only recently, it seems, have organizations been prioritizing and recognizing the importance of linking these areas together, including the following:
Sourcing – Integrating services procurement into a standard strategic sourcing process such as benchmarking/target costing with preferred or incumbent suppliers, reverse auctions, multi-round sealed bids, optimizations, etc. As with indirect and direct materials categories, ideally one would also aggregate and rationalize as much volume as possible at a single time (e.g., annually), rather than handling negotiating and contracting on a one-off basis.
Supplier management – This includes not only the onboarding of suppliers and the contingent/services workforce, but also broader supplier performance management. As with direct materials, supplier management activities for services should include developing key suppliers and ensuring contract compliance based on quantitative insights (e.g., quality/SLA adherence, fill rates, turnover).
Compliance / risk – This is perhaps the most important area for general services procurement interest at the moment. For contingent spend, 1099 and worker classification is just the ante in this regard. We constantly get questions on cyber/security issues, such as systems and facility access from organizations interested in more tightly integrating services procurement compliance / risk programs with VMS and others.
“Inventory” and capacity – Procurement organizations tasked with managing services spend are increasingly cognizant of the need to focus on inventory and capacity with services suppliers, including risk mitigation planning. In other words, ensuring that a particular “back-up” plan to shift spend amongst suppliers, such as hosting or cloud/virtualization providers, is not the same back-up as dozens of other companies, which would exhaust capacity.
In short, more practitioners and those who advise them realize that with services procurement, focusing on the entire services lifecycle through close integration and linkages with all areas of the business, by category, is essential to manage for the sake of total value (not just cost) and improved outcomes for stakeholders. The era of simply “sourcing services” is long past.
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