Why Outsource Procurement?

This blog is full of information and concepts concerning the most efficient and effective ways to outsource procurement, but sometimes lost in these in-depth discussions is the greater question: why outsource procurement in the first place?

Outsourcing is an important tool for both large and small businesses. Some of the common benefits, as reported by this archived New York Times article, include converting costs that are fixed into those that are variable; releasing capital (which can then be reinvested into the business); allowing companies to avoid large expenditures during their infancy; and potentially making companies more attractive to potential investors. Nearly any part or segment of a business can be outsourced— and more recently, this has included procurement.

Why Outsource Procurement to Consultants?

Procurement outsourcing often involves a variety of services, including transactional services (day-to-day buying, processing purchase orders, etc.), tactical services (performing spot buys, providing internal support, etc.), and strategic services (end-to-end category management, strategic sourcing projects, etc.).

Whether a company chooses to outsource all their procurement activities or just a few, there are several benefits that can be enjoyed by bringing in procurement consultants. These perks include:

• Tapping into a well of experienced talent. 
• Improvement in efficiency when sourcing unfamiliar or new categories, such as master agency procurement, creative agency procurement, agency record procurement, etc. when brought in to previously off-limits categories like Sales & Marketing. 
• Access to proven cost cutting measures, and increased company revenue. 
• The flexibility to adapt to an ever-changing market. 
• Improving the organization’s industry, functional, and categorical expertise. 
• Clear performance targets (which often leads to more satisfaction among stockholders and business investors). 
• Realization of available savings (through implementation services, compliance tracking, and reporting services).

In addition to the direct benefits, relying on outsourced procurement services can allow internal procurement teams to focus their efforts on their day-to-day activities that are more centric to their company’s successes.

Examples of Successful Outsourcing in the Public Sector

The healthcare.gov launch is just one example of an outsourced IT failure. Per a recent NPR report, nearly 94 percent of large-scale IT projects are unsuccessful—and this is primarily due to poor procurement practices-including failure to identify all potential suppliers in the market, failing to properly qualify suppliers, and a poor monitoring of the chosen supplier’s performance.

However, there have been some recent examples of successful outsourcing in the public sector (particularly within the IT category). These examples include:

• The Consumer Financial Protection Bureau successfully outsourcing its web development, giving tech and procurement a seat at the table from the very beginning so that the most knowledgable resources were available in all steps of the project; a vast difference from typical slow government procurement. 
• The procurement director for Kansas City, MO writing flexibility into their RFx documents, producing SOWs that provide suppliers with the wiggle room necessary to provide innovative solutions. 
• IT procurement staff in Philadelphia using popular code site GitHub to post the city’s “open data policy” for all eyes to see, and using the site to solicit project bids, giving them access to a new channel for supplier identification.

Elise Hu, of NPR, also notes that all of the projects listed as being examples of successful tech projects provided “openness in sharing requirements behind IT projects from the very beginning of the procurement process, and showed an eagerness to have smart tech people inside their departments.”

In sourcing app and web development services for our clients, Source One has developed the best practices and collected the unparalleled market intelligence necessary to ensure our clients’ projects success. As one of the most experienced and innovative strategic sourcing & procurement services firms in the industry, we have access to the best data and supplier lists available, the expertise to make best-fit recommendations, and the superior management skills and tenacity necessary to implement the projects, see them through, and have them completed on time.