New Research: Managing Indirect Services — Procurement’s Greatest Opportunity?

We're excited to announce our latest Spend Matters research brief (coming from the UK): Managing Indirect Services -- Procurement's Greatest Opportunity? Likely relevant for most Spend Matters readers in different industries -- from manufacturing to the public sector -- the genius of Peter Smith's latest paper is that it takes a non-technologists view at the knowledge, platforms and skills required to get more from services spend. As we suggest in the introduction, "Improving procurement across indirect services categories offers significant opportunities for savings. However, executives need to recognise the challenges, understand the value drivers for each category and identify the right strategies. Data, tools and capability must be carefully chosen to be appropriate, and in particular, specifically designed to meet the needs of these spend categories."

In the paper, Peter argues that organizations should focus on four key areas when it comes to getting more from services spend. The first area essential to target is "market and supplier understanding." Here, "Procurement must develop a deep understanding of the markets in which they are trying to operate. These markets are often complex and rapidly changing and offer a plethora of supplier options." The second area of focus should be on "shareholder credibility." In this regard, "An executive mandate is valuable, but more relevant is gaining credibility from internal stakeholders and procurement must recognise that it has to constantly demonstrate that it can add value to the organisation."

Third, procurement organizations must apply "appropriate sourcing strategies" to services spend. Here, "The concept of 'appropriateness' is important in managing indirect services. Applying procurement methods that have worked for buying discrete goods poses two problems. Firstly, normal goods sourcing methods are unlikely to deliver optimum results. Secondly, the use of documentation and transactional processes designed for procuring discrete parts (that cannot cope, for instance, with project billing and change order processes) will rapidly cause a loss of credibility with supplying organisations."

The fourth area that Peter suggests organizations focus on is "data and technology," topics that we cover extensively in the area of services procurement on our main site. In these areas, Peter argues, "Access to the right tools and technology is critical in delivering data that provides a deep understanding and competence to drive value and performance from external providers. From spend analytics through to performance monitoring and reporting tools, it is hard to achieve strong performance or results in these categories without the appropriate technology support."

The best part of the paper is a maturity model, which describes four stages of services procurement capability starting with the "excluded Level" where "procurement has little or no involvement with complex services." Next comes "assisting." The third level is the "involved" phase, and finally, top performers can reach the "driving" stage. Examining each of these four areas, Peter explains the overall position and role of procurement, the use of technology/tools and the benefits and outcomes organizations can expect as a result of investment.

Throughout the rest of the paper, Peter explores these topics and maturity levels in greater depth. He also makes a number of recommendations for organizations pursuing complex services procurement programs and dissects the opportunity of professional services, as one example. If you're curious to learn more about how procurement can best tackle complex services categories, our latest research on the topic provides an ideal primer. Global Spend Matters readers can download Managing Indirect Services -- Procurement's Greatest Opportunity? free of charge today. We also recommend some additional Spend Matters research papers on services procurement:

Services Procurement Benchmarking – Truth in Numbers to Achieve a New Level of Program Results

Getting the Most From Analytics and Benchmarking

Jason Busch

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