Procurement has become significantly more important to the success of businesses over the past few years. Controlling costs and maintaining supply/service levels during the global pandemic was of utmost importance for all businesses. Companies became acutely aware of this fact during the recent Covid-19 restrictions and lockdowns.
Company strategy and the procurement process go hand-in-hand since the ability to purchase certain materials or services efficiently and effectively dictates if a business’s operations will be profitable. It is essential to find reliable manufacturers and suppliers to fulfill company requirements so, at the end of the day, operations can run smoothly and profitably.
However, given procurement’s comprehensive nature, it can require a business to devote a substantial amount of time and resources to manage. It is particularly difficult for small to mid-sized companies—who want to take their procurement strategy and business growth to the next level— to improve their procurement process without significantly increasing overhead costs. With limited in-house resources, building effective procurement solutions can quickly turn into more than your team can manage.
At one time, outsourcing services rather than handling them in-house was considered a trendy and popular business strategy reserved exclusively for large corporations. However, in today’s business environment, with several advisory firms tailoring their services to help small and mid-sized company scale, this is now accessible to companies of all sizes. Now more than ever, emerging mid-market companies are taking advantage of outsourcing traditional in-house services and realizing a host of benefits.
What is Procurement as a Service (PaaS)?
Procurement “as a service” (PaaS) is an outsourced procurement model that combines technology, automation capabilities, analytics, and professional expertise to handle some, or all, of a business’s procurement functions. It is now increasingly common for businesses of all sizes to outsource some or all of their transactional and strategic procurement activities. Businesses are realizing that the PaaS model offers greater value and flexibility for their enterprises because they can receive the expertise and tools they need on-demand and only pay for what they need.
What are the Benefits of Outsourcing?
Return to Your Core Focus
For growing small to mid-sized organizations with limited internal staff, time is a precious resource. One of the biggest setbacks that can halt a business’s growth is a pile-up of non-core activities that has current staff stretched thin. By outsourcing procurement activities, your in-house team members will no longer be distracted by tracking down the best suppliers for materials or services, comparing costs, or otherwise trying to create an optimized procurement strategy. As a result, your business can return to its core activities and focus on growing and doing more of what you love.
Become More Flexible and Competitive
Quickly adapting to change is a must in a volatile market. Having an outsourced procurement team laser focused on the micro/macro-economic factors that affect pricing and supply availability, gives businesses the flexibility and edge needed to remain competitive in their respective marketplace. Outsourced advisory firms are also better able to keep abreast of procurement best practice and emerging technology trends.
Increase Efficiency and Productivity
When outsourcing your procurement activities to experts, businesses can quickly improve their team’s operations, giving them back the time they need to focus on completing core business activities. Procurement experts can streamline the entire procurement process. They can more efficiently manage the entire source-to-pay process by leveraging their existing infrastructure, deep domain expertise, enhanced processes, specialized technology, and valuable networks.
Access a Network of Experts
When outsourcing procurement services, small to mid-sized companies enjoy greater access to previously unavailable suppliers, technologies, and experts. With a wider network, these businesses can ensure better pricing, quality, and value than could not previously be achieved on their own. Let’s be honest, the best procurement experts likely don’t coincidentally reside where your company is located. Additionally, it is daunting for small companies to compete for top talent with larger more established firms. Therefore, by outsourcing, businesses can immediately tap into a pool of experts, from wherever they reside, and compete for talent and ideas on equal footing with their larger counterparts. This finally gives companies best-in-class access without the hassle of building an in-house department.
Cut Costs and Only Pay for What You Need
Every small to mid-sized business grows and comes to an inflection point – do we invest time and money to build out an in-house team or outsource those activities to experts? Outsourcing part, or all, of your procurement needs, eliminates the burdensome overhead costs associated with recruiting, hiring, and training new employees. Additionally, employee benefits, insurance, operational costs, office space, and IT infrastructure and support (just to name a few) are no longer needed either. Outsourced procurement inherently provides a more cost-effective model because it is based on client consumption, meaning businesses only pay for the services they need in an on-demand way.
Commonly Outsourced Procurement Services
Savings Opportunity Assessment
A savings opportunity assessment reviews current state company activities across various categories of spend and develops specific savings targets across those spend buckets. Savings opportunity assessments identify, evaluate, and quantify potential savings projects for businesses. It helps organizations learn their current procurement performance and shows them where they can optimize to achieve maximum value.
Supplier Management
Supplier management is the process that ensures businesses receive maximum value through the supplier relationships they establish. It identifies tactics to optimize supplier performance and develops strategic approaches to wholistic management which reduce risks and costs and increase efficiency. Supplier management facilitates clear, open communication that builds strong, long-lasting supplier relationship and helps enable business collaboration and innovation.
Contract Management
Contract management is the process of efficiently managing, executing, and analyzing supplier contracts. The management process includes negotiation of terms and conditions, certifying compliance of terms, and documenting any changes. Contract management is a critical component of the procurement process because it defines an organization’s relationship with its vendors, suppliers, and any outside service providers. Professional contract management can reduce supplier costs, easily monitor and manage expenses and terms, execute agreements with new parties faster, increase compliance, mitigate risks, and better manage business relationships.
Sourcing Execution
The sourcing process includes the vetting, bidding, selecting, and tactical management of suppliers who can best deliver on a company’s requirements and deliver best value. Sourcing execution includes but is not limited to in-depth supplier research and due diligence, development of sourcing strategies, facilitation of the RFI/RFP process, and ultimately the successful selection of suppliers that best meet an organization’s criteria.
Spend Analytics & KPI Measurement
Spend analytics collects company spend data and conducts a deep forensic analysis to illuminate how a company is spending its money and where there is opportunity for improvement. This in-depth review of procurement data generally produces a roadmap of activity that can generate value by pulling a variety of savings levers such as sourcing, compliance, and demand management. Development of KPI’s (key performance measurements) help a business focus on the key metrics that drive overall company and departmental performance.
Category Management
Category management is the wholistic and strategic management of a category of spend (i.e. Legal, Professional Services, IT, MRO, Marketing) to maximize the value in that category. Category professionals gather business intelligence and marketplace information in their specific spend areas, deeply understand the supplier landscape, stay on-top of trends, risks, supply & demand issues and are deep domain experts. Most mid-market companies cannot afford to hire experts across all the various categories in which their company spends money. Therefore, outsourcing is highly effective.
Procurement Transformation
Procurement transformation is a holistic approach to enhancing all components of a company’s procurement operations for improved results and long-term sustainability. It looks at operating model design and optimization, analyzes current capability through diagnostic and gap analysis, and conducts a people, process, and technology assessment – among other things.
Procurement Operations Support
Procurement operations support services supply help needed to assist with activities such as execution of the Req-to-PO process, SOP development, compliance management, RFx development, and supplier set-up and onboarding – just to name a few.
What’s Next?
If you’re interested in outsourcing some or all of your business’s procurement activities, PEAQ Procurement is here for you—no matter how big or small the challenge.
To learn more about our procurement services and approach, visit our website at https://peaqprocurement.com
Got any questions? You can also reach us at [email protected]. We are happy to help.