Indirect services – a challenge and opportunity for procurement (part 3)

We’ve been featuring our new research paper titled “Managing Indirect Services – Procurement’s Greatest Opportunity?  (available to download free of charge here), and we discussed in previous posts the benefits of procurement operating in these areas, some of the barriers, and what is needed to succeed. In the paper, we then take a look at the tools that can support procurement.

Those tools may be as simple as appropriate contracts and tender documents.  Too often organisations use documents cobbled together from the last widget or stationery contracting process. We’ve seen a set of Ts and Cs that talked about “suppliers using their own welding equipment” being  used for a strategic consulting contract. Not only are these tools not fit for purpose, they lose procurement vital credibility when it comes to establishing a role within their own organisation.

For organisations that aspire to be truly capable in these area, it is also important to use technology that can support services procurement, and is designed for the purpose. Technology is of course only one of the key enablers that drive success; information, skills and process are all important as well.

The final section of the paper looks at professional services as an example of a complex category, and explores what we’ve called the “sources of value”. We look at how strong and capable procurement input can provide value to the organisation – what are the levers that need to be pulled?

So, for example, that might include understanding how and when to use different commercial models, such as target price, fixed price for delivery of defined outputs and risk/reward mechanisms; or managing the risk and regulatory aspects specific to consulting (e.g. knowing who is on site, managing confidentiality and data protection issues).

This leads us on to thinking in more detail about the technology  issues for this category. As we say:

So what might the capabilities of a technology solution for consulting services look like?

  • Ability to handle complex contractual arrangements, including provision for part-payments, payments based on results, and “statement of works” type assignments
  • Automated ‘call-offs’ or competitions between preferred suppliers, communicating requirements to multiple providers and supporting the assessment of responses
  • Ability to monitor and measure performance, enabling tracking of Key Performance Indicators (KPIs), including achievement of deliverables, performance ratings, etc.
  • Tracking of consultants at an individual level where appropriate; monitoring hours worked, security or other accreditations
  • Management  of the billing process, including handling of complex commercial and
    payment models
  • Tracking and reporting of performance by provider, budget holder and assignment

And to finish here, let’s just quote from the conclusion in the paper.

Improving the procurement of indirect services spend categories offers significant potential for many organisations, and while excellence in these areas is not easy to reach, it is achievable with the right approach. Furthermore, the rewards can include significant value improvement, cost reduction, an improved risk profile for the organisation and competitive advantage in a dynamic marketplace.

Perfect reading for the holidays – why not download it now!

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