Lessons From the HfS Blueprint Session Applied to Procurement Services Delivery

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Earlier this week, I stopped by the HfS Blueprint event in Chicago, which brought together similar numbers of practitioners and providers in an intellectually-focused exchange (in contrast to other BPO-focused events more centered on networking and less on content). During one of the presentations, Lee Coulter, CEO of shared services at Ascension Health, and Charles Sutherland, EVP of research at HfS, explored a number of areas driving the future of cost reduction in services delivery (whether delivered internally, by a captive shared services organization or a third-party).

FREE Research: The 4 Faces of Procurement

The presentation was quite broad and deep, spanning topics from the rise of robotics to labor cost arbitrage as individual drivers of cost reduction in BPO and shared services delivery. One area that caught my attention, with particular applicability to procurement, is when to know a particular function (e.g., a transactional center of excellence) is ready to move to a lower cost labor approach.

Lee and Charles suggested, among other variables, that the stable throughput of volume (e.g., steady number of POs, invoices, etc.), stability of service completion and stability of quality performance all important contributors to knowing whether or not a function could effectively be put into a lower cost labor delivery model. Early data from a Spend Matters research project that is currently being fielded suggests, in particular, outside of basic service monitoring, the majority of procurement organizations do not measure quality of service delivery and consumption as well as they do the sourcing or production of materials or goods.

Perhaps this one data point alone suggests that more companies are not yet ready to reap the benefits of lower-cost shared services or BPO delivery – despite, in many cases, having pulled the outsourcing of low-cost CoE trigger already.

Spend Matters Key Takeaway: Prioritize the performance management of services before labor-striving to take advantage of lower-cost delivery of internal and external services.

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