Procurement Shared Services Center
9
Apr
2018

Top challenges of procurement, shared services can resolve

Many companies today have a strong focus on improving cost efficiency resulting into a paradigm shift in the role of procurement. The traditional procurement professionals have walked out of the stereotype of “RFI – RFP – comparison – negotiation – contracting – SLA / KPI – deliveries – receipt – acceptance – payment” cycle. If that’s what is expected of the procurement team, sooner they would be replaced by a robotic process.

Many procurement experts have assumed that their role is to buy right quality at right price at right time – or that’s what they have learnt from their eco-system. This has made bidders to adjust their quotes anticipating the next steps and let the buyers thrilled about their achievements by walking with them through the predetermined path.

The traditional way is becoming mechanized now and can be easily replaced by less experienced people having lower skill set to perform the job. One must think beyond the traditional model of RFI/RFP to bring value to the organisation. Now, one has to keep engaged in bringing disruption to the way we work, co-build the solution with partner to bring early adaptation & fast mover advantage, innovative cost modelling, selective outsourcing of routine tasks, effective use of e-sourcing/ e-auction in the organisation, deferred payments thru buyers credit / suppliers credit etc.so that you are ahead of competition, ahead of time.

Outsourcing to a Procurement Shared Service Centre armed with Technology, Best-in-Class processes, Big Data analytics, IoT exploits and enduring partnerships eases the common worries and brings significant cost efficiency.

A procurement SSC works on three fundamental distinct processes within sourcing and procurement – strategic, tactical and transactional.

  1. Strategic activities encompass multi-year and annual planning of sourcing programs; identifying optimal sourcing strategies and suppliers, risk planning, and partner relationship management.
  2. Tactical activities are high-level, yet execution focused- supplier development, contract implementation, spot buys, contract management and so forth.
  3. Transactional activities involve executing purchase orders, and day-to-day follow ups on deliveries and purchase orders

 

The procurement SSCs bring the following values to the organisation:

Strategic Focus – Traditional Procurement model often directs much of its capacity to transactional /tactical activities such as ad-hoc sourcing/spot buying, and purchase order processing. By being so reactive, its ability to perform proactive category management activities is limited, despite the fact, that these are the real drivers of savings and collaborative business partnering. A procurement SSC provides proactive category management and brings more strategic focus to the organisation.

Efficient Category Management – A best-in-class category management is focused on finding a perfect balance between continually reinventing the category strategies to unearth newer alternatives, optimizing third party spend and minimizing supply disruptions to unlock sustainable benefits. A procurement SSC recognizes category management as a key enabler in transforming businesses and helps large organizations build this expertise.

Consolidated Spend and economies of scale – Shared services organizations are better positioned to consolidate buys across an organization and thus acquire more volume discounts. In organizations where multiple procurement operations work in silos, it is not uncommon to find several relationships (and purchase contracts with varying terms & conditions) with a single supplier. In such cases, consolidation naturally leads to more bargain power in purchases and contracts, ability to pool experience, knowledge and skills. These also lead to reduction in total cost of ownership.

Improved Spot Buying Efficiency – Monitoring recurring demand patterns driven by similar requests can enable the procurement team to identify opportunities for the creation of procurement catalogues. These electronic catalogues enable transactions that were previously reactive spot buys to be converted into self-service requests. With procurement no longer needed to be actively involved in such buys, overall tactical effort can be reduced.

Standardization – Standardization of procurement processes result in standardisation of products/ services, purchase agreements and lower supplier risks.

Simplification – With pre-defined steps, simplification of entire sourcing and procurement process with pre-defined automated workflows becomes a possibility

Best Practices – Driven from leveraging information technology (such as e-auction tools and e procurement) and process automation, best practices in procurement services, ensure operational excellence

Governance and control are enhanced which lead to better cost saving potential. Many companies tend to fear that their confidential information, know how will be compromised in a shared service situation. What generally happens, however, is the exact opposite. Buying channels are tightly controlled and monitored so compliance is higher. Increased levels of automation ensure even more – complete visibility and performance reporting. Connectivity across all levels of the client organization and all levels of the procurement is enhanced.

Increased Contract Compliance – By mapping on-going requests against existing supplier agreements, the procurement team can readily identify and respond to non-compliance incidents. Insights acquired from recurring cases across the enterprise’s collective business units, countries, and categories can be centrally archived and accessible to decision makers, providing the basis for reviewing and changing management practices.

1 Comment

  1. The main reason organizations have embraced procurement is to increase the productivity, provide a clear picture into everyday transactions and make it simpler for users to get the supplies that they need. Thanks for your ideas on this topic.

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