Thursday, September 02, 2010
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"Procurement Outsourcing"
Analysis: An educated approach to procurement outsourcing
In 2007 A.T. Kearney published an indirect procurement study that hinted at a dramatic increase in procurement outsourcing before the decade was out. Now, three years on, similar research by the same firm has suggested that its original analysis was wide of the mark.
Of course, back in 2007 few could see the full extent of the storm that was brewing in the global economy but, that turbulence aside, there appears to be a number of reasons why companies are adopting procurement outsourcing at a far slower rate than anticipated.
"We conducted the first Indirect Procurement Study in 2007 and there were high expectations among the respondents for the adoption of advanced practices like outsourcing of indirect procurement, advanced data analytics and benefits tracking" said Jan Fokke van den Bosch, A.T. Kearney procurement and analytic solutions vice president and study co-leader. "The 2010 study shows that the adoption of these advanced techniques have taken place at a much slower rate than anticipated."
Fears persist over the maturity of the market, while risk is still a major consideration for many companies still reeling from the impact of the economic downturn. However, for an outsourcing area that began back in the 1990's, procurement outsourcing is yet to enter the mainstream - and at least one high profile procurement figure believes that a lack of education could be among the major reasons for its slow growth.
"I have to say from what I've seen in procurement functions, the knowledge of outsourcing is typically poor," says Damon Jones, CPO at Rentokil Initial (pictured).
That said, Jones acknowledges that some industries have taken greater strides than others. "It has improved but only within certain sectors," he says. "The financial services sector has put a lot of time and money into improving outsourcing knowledge, petro-chems has done likewise but I think outside of some of the major sectors it's a fairly weak knowledge base."
The A.T. Kearney study also outlined the changing face of procurement outsourcing, and the trends that were now emerging in the immediate post credit-crunch era. According to the research the focus of procurement outsourcing has shifted from business process outsourcing to closer collaboration with managed service providers for specific spend categories.
This has seen areas such as facilities management, fleet and travel outsourced to specialist providers on a piecemeal basis, as procurement operations look to bring in expertise in the areas of spend which they believe can deliver the most benefit - with the least risk.
But it's this risk - and the seemingly inherent fear of procurement outsourcing that permeates the profession - that is leaving procurement outsourcing lagging behind.
There are those in procurement who would argue that this is partly engendered by the fear that widespread adoption of procurement outsourcing would bring with it swathes of job losses and, ultimately, a loss of power for the CPO. But, on the flip side, it could be argued that by outsourcing certain areas of procurement spend, the CPO can concentrate on assuming a more strategic role, which will boast both the function and the individuals standing with the wider-business.
For the time being, however, procurement outsourcing remains one of business's last great untapped areas of potential - and an apparent lack of outsourcing education within the profession is likely to ensure that it remains that way.
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