Beyond BPO: Managed Procurement Services

I recently sat down to read Ariba's new whitepaper on managed procurement services (what they're calling procurement BPO). After a detailed scan of the paper, I came away intrigued by the managed services perspective, which argues that traditional outsourcing approaches are not enough when it comes to Spend Management. In the paper, Ariba defines managed procurement services as "the transfer of responsibility for managing specified categories and processes to an expert, third-party provider who can provide sustainable, ongoing purchasing improvement. MPS goes far beyond transferring headcount via procurement outsourcing by helping companies achieve new levels of savings and efficiency over time." According to Ariba, managed procurement services "goes beyond traditional BPO by focusing on increased savings primarily related to spend (not labor or transaction costs) of five to eight percent year-over-year savings over the life of the relationship."

This analysis and description is in line with the results of a recent study that Supply Management quoted based on an Economist survey of 180 managers (including "senior financial staff, purchasing, and board members"). This study found that "just over half of the respondents already use outsourced procurement services or are willing to consider using them" and that "6 in 10 thought outsourcing procurement leads to improved processes, category expertise and service levels." In addition, "more than 50 per cent said it would increase net income. Further, 50 per cent said third parties could achieve savings more quickly than internal practitioners."

Jason Busch

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