Modeling and managing total cost is an important best practice for procurement organizations expanding their services procurement efforts. In the direct supply chain, cost management is religion. From modeling the total cost of individual parts or components – including raw materials, labor, value-added elements, etc. – to factoring in inventory carrying costs and general working capital, total cost is the direct procurement king. But in services procurement, we typically only build limited visibility into total cost both from the buyer and the provider (cost breakdown) perspective.
Category Archives: Services and Indirect
We recently started our analysis of the services procurement market by looking at the evidence showing how the staffing marketplace is failing procurement organizations. Today, we turn our attention to the “why” and the various sets of factors that are holding back organizations from gaining more value from their services procurement spend. This value includes greater savings, of course, but also reduced risk, increased compliance, better talent management and time to focus on innovation, continuous improvement and business outcomes. In this Spend Matters PRO analysis, Jason Busch, founder and managing director, goes beyond the standard “fox watching the henhouse” issues with the traditional MSP/staffing market. Finally, to conclude this series, we will offer a prescription for changing the market from the inside out with procurement-led initiatives.
There’s an incumbent ecosystem in the services procurement universe that has made a business out of delivering the bare minimum to keep customers satisfied and maintain the status quo. No, we’re not referring to the “tools” providers, but the sad fact is that within the more capable vendor management system (VMS) tool sets today, much of the more advanced capability in these solutions goes untapped or is only partially used. Who is to blame? It’s easy to “shoot” the messenger – staffing firms and the incumbent MSP, but the blame rests with numerous other parties as well, including consultancies, outsourcing firms, staffing researchers and, perhaps most serious of all, procurement itself. In this 2-part Spend Matters PRO analysis, Founder and Managing Director Jason Busch highlights the contributing factors to how and why the staffing and contingent market is failing procurement.
Beeline Acquires OnForce, Setting Up A Divergent Talent Philosophy to SAP, Fieldglass and Ariba (For Now)
Earlier today, Beeline announced it had acquired OnForce, one of a select group of vendors on the periphery of the vendor management system (VMS) market targeting the recruiting, on-boarding and management of what are best known as “freelancers” in the global talent market. Terms of the deal were not announced, but we expect it was a strategic rather than a financial-led acquisition (i.e., the transaction was not just a question of adding accretive revenue) which would suggest a premium multiple on revenue.
impacore: Keeping McKinsey, Bain, and Other Consultancies Honest With a New Services Procurement Model (Part 1)
But professional services procurement is without a doubt still one of the most challenging and fascinating category areas for procurement executives, leaders, and functions to address, for a number of reasons. It’s always interesting, therefore, to hear of new ideas and approaches. One such approach is coming from a relatively young German firm, impacore, founded some four years ago, who are promoting a novel solution.
Earlier today at the One Vision customer road show in Chicago, Coupa shared its latest product roadmap, highlighting a number of new areas of product expansion and enhancement. Coupa maintains its perspective that expanding organically, with fully integrated modules built on a common suite and platform, is preferable to expanding through acquisition. Among other areas, Coupa is planning material enhancements or new modules in sourcing, e-invoicing compliance (and features), inventory management, dynamic discounting, and services procurement in the coming 15 months. All of these enhancements and new applications will continue to be built on Coupa’s platform (it hasn’t yet been […]
The manufacturing, food and CPG industries have gotten progressively "smarter" in the past decade by using market intelligence on pricing (from market indexes in contracting to statistical forecasting) to manage commodity risk and exposure - and drive better procurement outcomes. Yet most companies are still sourcing and managing services-based categories, (e.g., contingent spend, consultancy services, legal spend, marketing) without even 10% of the intelligence they have around spend in their core business! Join Jason Busch, Pierre Mitchell, and special guest Roy Anderson from Metasys as they discuss Services Procurement Secrets: How to Use Category, Market, and Pricing Intelligence on this afternoon's Spend Matters Pop-Up webinar from 1-1:30pm Central.
The line between outsourcing and sourcing managed services can be somewhat blurry because the services provider does assume responsibility for the delivery of a project or outcome tied to a project (but not necessarily the overall charter or management of what the project is tied to). The easiest way to explain this dual-ownership is that under a managed services environment, the internal procurement organization maintains responsibility for sourcing strategy development (make/buy, demand management, specification standardization/rationalization, service level/quality requirements, etc.) and overall category management, including stakeholder engagement and management, supplier development, internal reporting, etc.
Plan for due diligence processes and transition phase. Don’t hand-over to a totally different contract management team. Be an intelligent, informed customer; don’t over- or under-manage the contract and supplier.
We’re now into recommendations around the execution of outsourcing projects, dividing the recommendations into three sections – strategy (last week), implementation and ongoing delivery. As we said last time, we can’t cover every aspect of outsourcing good practice here, and for many experienced procurement professionals, some of what follows may appear somewhat obvious. But we hope even readers in that category will find something of value.
Market Informed Sourcing, (or MIS), as I’ve called it (or optimisation, expressive bidding, collaborative sourcing as various software providers term it) is a different approach to sourcing compared to traditional sourcing or category management. Now we should start with some caveats – MIS is not appropriate for every procurement exercise or every category. For relatively simple and tactical procurement exercises or categories, it will probably be unnecessarily complex as a process. But where it is feasible, and appropriate, it offers something rather different to the usual sourcing process. Let’s look at how and why.
We wrote in the last article about the standardised nature of category management process and practice, and the dangers inherent in approaching different categories via that standard approach. Now let’s consider another failing of much “traditional” category management methodology and philosophy. We might define this as an overly procurement-centric approach to the whole task in hand. The buyer is placed in an almost deity-like position, controlling the whole process and with other participants fitting into their scheme and doing what they are told to by the all powerful category manager.