Globalization opened up the Western world to the Eastern and vice versa. With this dismantlement of borders came a whole new set of risks, concerns and opportunities.
The nature of spend management didn't necessarily change, but professionals concerned with the practice learned to take advantage of favorable circumstances when these were presented to them. Building relationships with overseas or nearshore suppliers involved deducing not how much a company would save, but how much it would gain.
Outside looking in
Arguably, globalization also gave birth to business process outsourcing. All too often, enterprise leaders who have been working at their companies for some time are emotionally invested in the decisions they make, hindering their ability to make critical decisions, a few of which may or may not "fit protocol."
SupplyChainBrain noted that, on average, spend management entities can deliver up to $6 million in savings to their clients, providing services at expenses 19 percent lower than in-house teams. While the statistics shouldn't be negated, it's important to analyze why these cost reductions are apparent. Those at procurement firms bring a number of different factors to the table when scrutinizing the sourcing concerns of their clients, such as:
- A diverse partnership portfolio: Vendors connect with hundreds of different organizations or more every year. With this networking comes a fundamental knowledge of what specific enterprises have to offer. Recommending certain suppliers based on past, thorough experience is a capability in-house teams can't necessarily offer.
- Knowing what's best: As was mentioned above, it's sometimes difficult for in-house teams to view situations without some level of emotional investment. In addition, professionals used to operating in a particular manner for an extensive period of time are typically hesitant to implement change. Outsourced procurement officers can objectively view situations, deduce which protocols are working and which are not, and then make calculated recommendations based on their conclusions.
An example of flexibility with critical assessment
One particular part of the world that is receiving an incredible amount of investment is the Middle East, especially around the Gulf region. Supply Management contributor Helen Gilbert noted that firms based in the region have many opportunities to expand portfolios, but the pace at which procurement teams must be developed isn't up to par.
Gilbert noted a survey of 100 chief procurement officers and directors throughout firms conducting business in the region, which discovered 95 percent of respondents believed strategic assessment will improve the Middle East's ability to add value.