Why Humans Win Over Machines and Speed in Outsourcing

Hot Topic

Richard-James-Proxima

We are delighted to publish this post on our hot topic Procurement Outsourcing from Richard James, Category Director for Professional Services, at Proxima.

 

Since its inception, the overriding majority of business process outsourcing (BPO) has been concerned with significant, one-off savings through labour arbitrage, use of technology and streamlining processes – and it was this that drove its rise to prominence. However, as outsourcing matures, we are witnessing a shift to more business performance-oriented value propositions right across the many functional activities for which outsourcing is used.

This is especially evident in procurement outsourcing. While savings are still important, organisations are increasingly aware of the importance of working with the right people who have the right expertise to provide a service ethos – not just an automated, functional one.

We believe procurement should not be treated as a function that simply sources products and services for the business. To be truly effective, procurement is about really understanding why firms buy in the first place. Looking at procurement from a commercial perspective ensures that once contracts are signed they don’t get lost in the ether and that the business gets the most value out of the supplier relationship.

But what should companies consider when looking for a procurement company to help with outsourcing?

  • Outsourcing is not abdication of responsibility – there is still a need to establish governance and clear management principles
  • Manage by outputs. But try to understand the inputs that are needed to drive these – for example, if you want the procurement outsourcer to establish ongoing supplier governance for 30+ critical suppliers, be fully aware that it will need 30+ quarterly meetings with these suppliers, each of which will require preparation and post-meeting action plans
  • SLAs should relate to the drivers of your business, not the delivery parameters – measures of quality, spend under management and financial benefits are far more meaningful than FTE or volume of POs processed per employee
  • Be clear about the relationship you want to have – if you’re looking for transactional efficiency it may be appropriate to treat the provider as a ‘supplier.’ If you’re asking them to manage strategic spend areas and direct interfaces with stakeholders, a more grown-up, partnership approach is necessary

As procurement outsourcing matures, businesses are able to extract more value from their supplier relationships. Savings are becoming more of an auxiliary benefit alongside innovation, risk, engagement and profitability. Success from procurement outsourcing, therefore, should boil down to three things:

  1. Providing better customer experiences
  2. Capturing and delivering market insights to shape greater innovation and commercial deals
  3. Protecting and enhancing value and risk through commercial management of suppliers during the lifetime of the supplier relationship

 

All of this requires procurement to be engaged with the functions it services on a continuous basis – not just every year or so for a sourcing event. This means skillsets such as relationship building, influencing, empathy and commercial acumen are vital in the teams that procurement outsourcers embed within the organisations for which they work.

Automate, automate, automate

The multi-tower BPO providers are all about the automation of transactional processes to get things running fast. They might for example suggest their retail client outsources its customer service desk to India. They’re all about focusing on scale of economies and need mass numbers to justify having large call centres churning out volumes of information. While previously the market indeed lent towards cutting labour costs and fast turnarounds, companies are now beginning to think again. Do they need to outsource to India at speed – why not do something different? The trouble is the multi-towers’ sheer size stops them from being able to quickly (and cost effectively) change because such a change has an impact on people, systems, processes, technology -- fundamentally an entirely new business model.

Although automation is not new for many industries – even the car industry has been using robots on the production line for years – it should not be the focus. Companies are asking how they can make their robot better. How can they make components better and build a better blue print than the ones used by their competitors? And to do this you need talented employees.

Robotics will never change someone’s mind to do things differently because companies will still have the need to buy. While they still recognise the benefits of back office automation, they are more likely to implement these from a transformational and sourcing angle.

Cleaning up Big Data

Outsourcing should also look at how it collects, packages and analyses data in order to add insight. As companies are beginning to use more big data - analysing important information on their customers to improve engagement - many are asking about dashboards.

But pushing out flashy dashboards won’t help business objectives in the long term if the data isn’t clean. Those dashboards still rely on inputs.

Procurement should be looking at what their client wants to track – is it compliance or brand awareness – what is important and how can the analytics fit around that. There’s no point having lots of big data if it’s not the right quality or does not show the business anything useful. Then it’s about having the right intelligence to action that data.

Procurement as the ‘service’

To outsource today companies should really look to procurement as a service, where insights are more important than a speedy, automated process. Third-party costs now make up 60 percent of revenue for large corporates, for many, these are decentralised and out of reach because they’re not linked to strategic objectives. Procurement should be the catalyst that enables this change.

Winning procurement is not just about offering advice but delivering insights that can bring real internal change to business cultures and behaviours. Only by asking the right questions about why you are using a supplier, and what challenges you want to fix, can a procurement outsourcer offer you a true service, enabling your business to make smarter decisions - ultimately leading to better business outcomes. Something a machine simply cannot do.

Discuss this:

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.