As the UK government looks for ways to reduce costs, it is widely anticipated that there will be a move towards Business Process Outsourcing (BPO) to help achieve the efficiency gains required. One area that may be looked at for outsourcing is Procurement.
Although the jury is out on whether Procurement Outsourcing delivers value, this post looks at what needs to be done to ensure success.
I believe that there are six critical areas in ensuring success;
1. Prepare: Aligning Objectives with the Provider.
BPO deals are typically long term arrangements and they require close and effective working relationships in order to be successful. A BPO provider is essentially an extension of the customer’s internal team. Ensuring a healthy cultural alignment and a trusting relationship between the parties is essential. This includes establishing open and regular communication and a clear mutual understanding of objectives, obstacles, and resolution requirements.
2. Create:Defining and Optimising Processes.
Procurement BPO works better when a customer’s processes are defined and accurate data is available. Some customers may be tempted to outsource the delivery of problem categories that are lacking standard processes, but an outsourcing engagement is not sufficient to fix fundamental process flaws or data gaps.
3. Implement:Securing Internal Support and Adoption.
If all of the internal constituents within the organisation are not committed to support and utilise the new provider, the programme’s success will be jeopardised.
4. Transition: Establishing Strong Governance.
In the course of any outsourcing engagement, issues will crop up and a thoughtful and well-supported governance plan will allow both the provider and the customer to deal with any roadblocks as they arise. Despite any current convictions that requirements will be stable over time, there will undoubtedly be unexpected changes to processes, delivery scope, delivery scale, dependent tools, and data.
5. Transform: Assuring Provider Innovation.
Providers should not be perceived as just order fillers, nor should they focus all of their innovation efforts around reducing their own cost of delivery. Both parties need to promote ongoing innovation by the provider that will benefit the customer.
6. Perform: Validating Savings.
After a few years, the baseline to measure savings can become hazy. This becomes particularly problematic when there is internal pressure to justify the cost of outsourcing, or when some portion of the provider’s payment is based on risk sharing.
Embarking on a Procurement BPO evaluation can be a challenging time for any organisation. With a sound evaluation methodology, an unbiased perspective, and a well-informed understanding of the potential benefits, costs, and risks, organisations can make value-creating decisions more confidently and execute those decisions more effectively.
The new coalition government has rather erratically announced a £7.5bn cut in the budgets for BSF and there is yet another outrage from local communities that have been affected.
Although, I never hear of any realistic alternatives from the moaners, having read a range of articles on the subject over the last week or so, I believe that there is a real option that so far just doesn’t seem to have been considered.
Looking at some of the designs that have been submitted for various projects throughout the country, it is evident that the architects are using the opportunity to make their mark in the local community and on the face of it, I don’t have any real issues.
However, it must be remembered that first and foremost, a school needs to be functional and it is apparent that some of the newly built schools just aren’t and that’s where the designers have got it wrong. Design over function never works!
So, what’s the alternative, an alternative that will reduce costs and just maybe facilitate the building of more schools?
I’m working on the premise that a school is a school and given schools of similar size, the obvious question is why do we need to have different designs. Lets concentrate upon designing the ‘ideal’ functional school and lets make sure that all future builds utilise at least 90% of this standard design. The remaining 10% will concentrate upon the look and feel and will facilitate some individualisation and styling.
The approach that I’m proposing is in practice in the motor industry – the Audi A4 has exactly the same underpinings as the VW Passat, as well as a Skoda and a Seat model. Although you can see the familiarity of the four cars when they are together, they still retain their individual styles.
Why can’t this be applied on designing schools?
That’s the question that we should be asking and forcing the government to consider.
Can Procurement continue to operate as it has for many years?
Can Procurement professionals continue to simply manage categories and focus all their attention on getting better deals from their supply chain?
I believe that the answer to these two questions is the same – absolutely not!
As the global economy sways in the wind almost daily at the moment, Procurement professionals have the opportunity to jump up, grab hold of the opportunity and drive change in the way that organisations think about and manage the supply chain.
Collaboration is the future and Procurement can and indeed should look to drive a collaborative spirit into the heart of every organisation (both private and public). Having worked with many organisations, I’m still surprised that;
- organisations still operate in silos – this is at the root of some of the issues in the UK public sector where departments do not collaborate at all
- category management is at the very core of procurement functions but this tends to focus on driving better deals with suppliers rather than looking at improving the end to end planning process
In future, we need to ensure that a collaborative spirit is applied across the whole organisation.
Collaboration is required throughout the supply chain process, from planning to ultimate delivery. It’s only when we get all of the key people (both internal and external) around the table to discuss openly the challenges faced by the organisation will sustainable solutions be found. Operating is a position of openness and true partnership is the way to go. Embrace every part of the supply chain to take maximum advantage of their expertise and knowledge.
Procurement functions are in an ideal position to take advantage of this opportunity – to become the conductor, the facilitator, the devils advocate.
Yes Procurement has a future, but not as we know it presently!
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