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21 April 2011 | Angeline Albert
Most buyers say they would leave their best individuals in place to manage a procurement outsourcing contract, the latest SM100 poll has found.
We asked 100 buyers if they would task their best person/people to oversee such an arrangement and found 76 per cent would, the remaining 24 per cent would not.
Buyers said procurement outsourcing offered opportunities to not only save costs by tapping into expertise and ideas from an outsourcing provider, it also enabled its in-house team to focus on more strategic issues such as demand management and stakeholder engagement.
Frank Omare, responsible for supply chain and operations at Ernst & Young said: “A key lesson of outsourcing learned from the past 10-20 years is that you should retain a high level of expertise in-house to get value for money by driving provider performance. They will need to ensure stakeholders’ requirements are met and there is someone who can challenge the service provider, where appropriate.”
One buyer said retaining the top talent also enables those left behind to concentrate on sourcing strategic commodities that can create competitive advantage or where they do not want to share trade secrets.
Chris Graves, head of procurement – services at local authority purchasing consortium YPO (Yorkshire Purchasing Organisation), said: “The skills of the person need to be closely matched with the role requirements - ie strong customer engagement skills, the ability to influence demand and also the charisma to sell the ongoing benefits of the outsourcing deal to stakeholders.”
Among the 24 per cent who said “no”, Brian Grew supply chain director at Live Nation said: “Outsourcing has advantages but needs to be actively managed and the right person to take on this management may not be the previous high flyer. Core to the selection is appreciating that the outsourcer is intended to be the functional expert and there should be just one expert.”
Buyers said the main reasons for outsourcing purchasing work included: taking advantage of economies of scale by going to providers with better buying power or more expertise in certain markets; avoiding further investments in transactional purchasing technology; getting rid of low value activities and creating more “headroom” to focus on more value-adding activities.