As use of the extended workforce grows, procurement has a key role in adding value

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The globalization of business continues to challenge companies as they search to find and secure goods, services and workers. For companies to be successful in this new reality, they must do a better job of procuring those resources. While most have identified improvements in the acquisition of direct and indirect goods, the acquisition of talent, namely contingent workers, continues to be a manual process that’s handled differently, often operating in isolated departments across the same company.

According to Spend Matters’ post “The Digital Transformation of Services Sourcing: What It Is and Why It Matters,” the sourcing of services — which often means using an extended workforce — is growing faster than other categories of sourcing. This services category, the article states, is growing globally at a rate 60% higher than that of goods, hitting a high of $13.4 trillion in 2019.

Many companies that use an extended workforce still rely on a disjointed system that finds external worker management done differently across various departments, like they’re in their own silos. Using these traditional methods, procurement departments are often operating without input from or information sharing with other departments that also play key roles in the procurement process — HR and finance.

Limited visibility

In traditional procurement departments, operations are often locally managed, even though there may be shared departments or global components involved, which can create a duplication of work, misclassification risk, poor tracking of the entire extended workforce and improperly managed spend.

Having little visibility into a company’s overall extended workforce results in procurement departments being focused on tactical, day-to-day matters. This approach leaves little time for strategic planning and the adoption of technologies to move away from the traditional to a modern, data-based approach. If companies can make the change, then procurement can help the organization gain control and visibility of extended workforce management across the entire company and better control spend.

A recent study by The Hackett Group, “The CPO Agenda: Become the Partner for Enterprise Agility,” found a number of impediments hindering some procurement departments, including mismanaged or low-quality data, poor visibility into spend because of silos across the company, inadequate technology and unclear, outdated processes that create confusion and repetition.

Growth and change

For procurement departments to create value for their companies, they need to lead or work closely with other departments to establish business strategies. According to Hackett, procurement “must expand and elevate its business relationship from gatekeeper and strategic sourcing expert to transformative strategic adviser.” This gives procurement the ability to become an equal to other departments already providing business strategy and value.

To support this change, procurement departments can take advantage of technology, especially workforce management tools that allow them to bring better and more data to the conversation.  The vital information collected about staffing vendors or any category of the extended workforce, which often includes workers identified as independent contractors and freelancers, can then be applied to any number of situations across departments. At some companies, for example, independent workers are paid using decentralized methods, which can result in improperly-managed spend. The data provided by procurement can help HR and finance see more clearly how many workers are in all categories, how they are paid and what spend is associated with each category.

By giving other departments a centralized view of spend in a major category, procurement can help the organization make better decisions about its workforce and be more agile. This shift can ultimately change a company’s engagement with its workers by directly sourcing talent and having more control over the experience of its extended workforce.

This Brand Studio post was written with WorkMarket, an ADP company.

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