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Are Managed Sourcing Services the Next Big Thing?

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Spend Matters welcomes this sponsored post from Brian Miller, vice president of services at Intesource.

While technology will always play a critical role in procurement initiatives, it’s not the be-all, end-all. In some instances, technology can even be an obstacle. Think about the dynamics within major organizations today — if a procurement team wants to transform quickly, or needs to get a timely new sourcing project up and running — the time it takes to vet, purchase, deploy and adopt a major technology platform could ground the project before it even gets started. I’ve heard technology horror stories where initial results take months, and sometimes even years, to come through.

This is where the managed sourcing services approach comes in, a model that’s less deployed in the procurement world today but poised to grow substantially in the coming years. In fact, industry experts predict the managed services market will nearly double over the next five years, reaching $193.34 billion by 2019.

While this approach is less common in the procurement world compared to traditional technology implementation, the approach can yield exceptional benefits and multiply the business value a company sees from its sourcing program. Let’s take a look at a few of the common questions around managed sourcing models and shed some light into what this approach looks like in the day-to-day life of the procurement organization.

What Exactly is Managed Sourcing?

Managed sourcing partners take on the day-to-day responsibility of remotely managing a company’s sourcing processes. They bring in their own outside expertise and work as an extension of the internal procurement team to make their clients more efficient, effective and agile, and ultimately take the heavy lifting off the internal team’s plate so they can focus on other key, more strategic initiatives.

What Are the Advantages of Going to Market with a Managed Sourcing Partner?

  1. No need for additional staff or training. Working side by side with a managed sourcing partner provides procurement teams with all the tools, processes, people and expertise necessary to foster innovation and drive bottom-line growth, without having to hire additional staff, implement new technologies or radically change processes. A major financial and HR benefit is the ability to scale your team, whenever needed, without worrying about the long-term ramifications of hiring additional staff or reallocating resources.
  2. Better address complex categories. Managed sourcing partners can help teams address complex categories and translate them into productive sourcing events. Like many members of your internal team, these providers have the resources and expertise to help define product specifications, determine which categories to take to auction, and which suppliers to invite to bid. But with a managed service partner, procurement teams extend their buying expertise for both direct and indirect spend, across multiple categories. Typically, a managed service provider will have deep experience, expertise and supplier relationships spanning several industries, providing an invaluable network gain for the purchasing organization.
  3. You don’t just get a tool, you get a partner. A managed sourcing partner is there to guide procurement teams with tried-and-true strategies and processes, whenever they need it. With managed sourcing, procurement teams have access to the people and resources they need to deliver high financial impact and ultimately move procurement from the back room to the board room. Many vendors talk about the people, process and technology methodology — but it really rings true with the managed service approach.

What Should CPOs Keep in Mind When Considering a Managed Service Approach?

When evaluating a managed sourcing partner, there are a few key questions to consider:

  1. How much support do they really offer? E-sourcing, for example, can facilitate procurement transformation only when employees — from the c-suite down — embrace it as part of the culture. With a tool, this can be difficult, but a managed sourcing partner offers a team of seasoned experts at each step of the way to make recommendations, answer the team’s questions, offer guidance, provide examples of past successes and take on the actual work. Users aren’t held back by how much experience they have with the tool, how much time they have in their day, or how comfortable they are with the process. Comprehensive support offerings should be critical considerations when looking to move to a managed sourcing approach.
  2. How do they view spend categories? The traditional one-size-fits-all approach to sourcing works only for simple categories and can limit potential savings, manageable spend and enterprise-wide adoption. Make sure your managed sourcing partner takes a customized approach and implements e-sourcing across all unique and complex categories, for both direct and indirect spend.
  3. Are they truly full-service? A full-service approach to e-sourcing is custom created to integrate with your current business processes. There is no hardware or installed software required. Full-service support covers all aspects of building and managing a sourcing event, while internal procurement teams stay in control. Whether procurement needs new sources of supply, RFI assistance, event setup or strategy suggestions, event execution, or supplier training, a managed sourcing partner should do it all while leveraging procurement’s internal knowledge and expertise.

Technology is crucial for high-performance organizations, but it takes a lot more than just a tool to drive the kind of high impact results that will shape the organization’s growth and future. With a managed sourcing partner, procurement teams have the support and resources they need to be successful now – not next year, but next week or next month – and fuel change initiatives that will truly and positively influence the organization.

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