Connecting the dots:
Transforming procurement to gain business value with BPO Jim DeLeo
Abstract While many firms have embarked on procurement system improvement journeys, most still utilize BPO services for specific tasks rather than a holistic structure, inhibiting their ability to capitalize on value created by a connected service. When procurement is viewed as a contiguous spectrum, the opportunity to unlock value emerges quickly. Perhaps more than any other ‘back office’ function, procurement operates best as a connected stream, where one task feeds the next, and inputs are rationalized to prevent blockages and friction downstream. Transformation efforts ought to focus on repairing and connecting gaps. The return on investment is well worth the endeavor.
Friction The situation is all too familiar. Mike gets a call from Suzanne. “I need a quick RFI; doesn’t the Bangalore team do that?” “Yeah sure,” Mike replies, adding, “What’s the trouble?” “Well, I went to the initial training, but it’s been a while since then, and I don’t remember the engagement process,” she says, adding, “Shouldn’t it be easier to get work assigned and to track where we are with it?” Mike smiles knowingly. “It’s a common problem,” he declares, “there are too many entry points into the process, and whenever someone new is added to the mix, it becomes very confusing and takes a long time to smoothen out. Rest assured; we are working on it.” Suzanne has another issue. “Also, it seems that the item master for the suppliers in this category does not match any of the supplier contracts,” she continues. “That’s been the case ever since we created a strategic sourcing group Suzanne,” replies Mike, “we are engaging one of our partners to transform our spend analytics and connect it better to the compliance process this year.” At such an early stage of this fictitious BPO engagement, that is the best promise Mike can make. In most cases, the process of smoothing the way in which on and offshore teams interact is long and convoluted; but it needn’t be.
Introduction The story of Procurement BPO began long ago, initially foraying into tactical support services that could be off-loaded from sourcing professionals in order to utillize time available for more strategic and high business impact work. This story is still being written and edited. In recent times, more advanced firms have further explored procurement outsourced services, whether off or near-shore, adding additional source to settle tasks. In some cases companies have engaged a service provider to run entire categories of spend from opportunity analysis to implementation. Wherever a company may be on this procurement journey, it has become very clear to procurement service providers that transformational consulting is an essential ingredient in the overall BPO mix. A transformational view is important during the initial transition phases. Procurement transformation consulting can be considered as the ‘glue’ that binds isolated procurement work streams together, providing entry into high performance practices, procedural alignment, and facilitating change from outdated process to high business impact value streams. (Fig 1) Going further, imagine engaging a transformational effort BEFORE kicking off a procurement outsourcing initiative. A full-scale ‘diagnostic’ could provide a comprehensive view of the current system, which would highlight areas of particular strength, areas to be developed, and business case analysis to determine the true ROI available by improving targeted areas. If, for example, spend analytics are particularly manual and challenging, a short-term low investment transformation project could rectify the gap, empower the outsourced service to provide more and better information at lower cost in the shortest possible time. Similarly, an unmanaged tail spend could be aligned under a catalog management transformation so that an outsourced procurement op