Using External Services To Drive Procurement Leadership – Read Our New Paper

We have a new briefing paper available - “Achieving procurement leadership through external services”.  You can download it here, free on registration.

We wrote it with support from consulting and managed services firm 4C Associates and in it we look at the various ways in which external procurement services can be used to augment internal procurement functions and capability. There are many different options these days, from casual contingent labour options to full-scale outsourcing, so an important part of the procurement leader’s role is working out how best to utilise the external market for support in the best possible manner.

Today, we have an extract from the paper in which we discuss the key options in terms of the types of support that are available.

 

  1. DEFINING THE OPTIONS

We find considerable confusion in the procurement environment around the use of words like “outsourcing”, “managed services”, and “consultancy”. Whilst in a sense the words themselves don’t matter, being aware of and understanding the different options, is vital. A lack of understanding can lead to unnecessary costs for a start. We have seen expensive consultants used in “contingent labour” roles for months or even years, when a lower cost solution may well have been at least as effective.

Outsourcing is defined as moving an activity that has previously been provided internally (by the organisation's own staff) into the externally provided market. Once activities have been outsourced, then they are usually delivered on a managed service basis (see below).

Confusion arises when people talk about "outsourcing" to cover a service that was never provided internally (or maybe was many years ago). "We outsource digital media buying" - was it ever done in-house? No, probably not. What is meant is that digital media buying is bought on a managed service basis. "We are outsourcing our catering service and staff and will then buy catering on a managed service basis" makes perfect sense.

The actual process of outsourcing can bring issues around staff transfer and regulations such as TUPE, as well as issues concerning systems, processes, property and so on. It obviously needs a careful business case but where the external market can deliver the activity in question better than it can be done internally, it may well pay off.

Whether or not the activity is triggered by outsourcing, there are three main ways in which external support is provided and bought in the procurement space - consultancy, managed services and contingent labour. Here are overviews for each, and the table then gives the pros and cons for each and advice on when they can be most appropriately used.

(To read the overview and the Table, download the paper here, free on registration).

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