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There is no doubt that the expertise, intelligence, and data third-party outsourcing providers can bring to the function to help deliver value. But, if outsourcing plans are poorly scoped or are not the right fit, these relationships may be doomed from the start.
Many of the challenges of outsourcing come from a lack of executive buy-in. Procurement teams require support from the entire organisation before bringing in any external, third-party providers. Those inside a company tend to either look at those on the outside and recognise the experience third parties can offer or think: ’Why should I listen to them, they don’t know my organisation?’
Awareness of these issues is necessary when turning to third-party support.
Procurement executives should pay attention to the following tips in order to make a success of outsourcing.
1. Don’t outsource relationship management
Most engagements face the biggest problems when relationship management is outsourced. Taking a step back and allowing a service provider to be the direct point of contact with stakeholders can be dangerous. There may come a time when the function needs to change its outsourcing model; if it has not been actively involved in relationship management procurement chiefs may find themselves having to build these relationships from scratch.
2. Flexibility is crucial
It is not unusual for the needs of a business to change within the first two years of a contract, or even within the first 90 days. Procurement functions need to ensure any potential changes are built in to a contract by opting for a flexible model.
A lot of contracts miss downside flexibility, too. Businesses are guilty of putting in place huge, long-term outsourcing contracts – seven- or eight-year deals, say – that only consider growth, leaving the business with no downside protection.
3. Consider cultural fit
Once a contract has been signed, the focus should be on building the provider/customer relationship and ensuring the right cultural fit.
This can be difficult to spot, as it’s more subjective than objective. Scenario planning and understanding how a provider will react to different situations will certainly help.
4. Pay only for what you need
It is not always necessary to bring in a full team of contractors to work on an entire project. What if the function needs only one person with specific expertise? It may only be 5% of a project that brings the return on investment that supports all other activities. Look at what the strategy really requires and pay for just that.
Taken from a full article by executive search firm Sourcing Solved, which can be read here
Philip Ideson is cofounder and MD of Palambridge, a virtual platform of procurement experts, technology and intelligence created to provide a broad range of solutions on-demand
This contributed article has been written by a guest writer at the invitation of Procurement Leaders. Procurement Leaders received no payment directly connected with the publishing of this content.