Last week I attended the Q1 Productions Pharmaceutical Procurement & Strategic Sourcing Conference in Philadelphia along with a few Source One colleagues and an excellent group of organizational leaders within the industry. The conference included topics ranging from Compliance to Procurement Transformation, a thought provoking panel discussion on balancing operational costs with product quality, and an insightful Q&A session on supplier negotiations. Late morning on day two, I presented The Future of Procurement BPO, which provided attendees with an overview of what we have observed in the industry in terms of how companies are leveraging various BPO models to help accelerate the maturation of their strategic sourcing capabilities to achieve unprecedented objectives beyond cost savings.

What I realized while preparing the presentation is that the audience would likely include a mix of procurement maturity ranging from category and supplier relationship owners buying reactively all the way to organizations with Procurement centers of excellence that are proactively managing their supply chain and indirect spend holistically and strategically. In order to address strategies that make sense to such a diverse mix of conference participants, I had to identify a few engagement models that cover the majority of requirements and could be considered fairly standard, they were: traditional, tactical procurement BPO, Staff Augmentation, and Advisory. The traditional BPO mostly speaks for itself. The idea for Staff Augmentation is that companies who have gaps in category expertise, market intelligence, or resources could benefit from outside help related to these strategic sourcing needs. Finally, Advisory encompasses strategy and management consulting related to developing a mature strategic sourcing department and program within the organization.

Among these models attendees could begin to determine where their company is on the Procurement maturity curve and where outsourced help may best fit into accelerating their improvement. Ultimately, a bottom up or top down approach may make intuitive sense for some, but a hybrid may be a possibility. For example, a company may find that outsourcing tactical procurement and working a consultant in advisory capacity to further develop strategic sourcing best practices would be the best fit.

After providing some guidance on developing a requirement set for enhancing existing capabilities with outsourced help, the remainder of the presentation focused on selecting the right partner including key criteria to consider, understanding short term and long term objectives, gaining internal and executive buy-in, supplier qualification, as well as some statement of work best practices. The presentation culminated in an in depth look at some supplier relationship management best practices.

A theme we saw throughout the presentations across both days was that savings is no longer the only metric by which Procurement is measured. In fact, it has become de-emphasized substantially within most companies. Procurement leaders are tasked with managing stakeholder alignment, increasing financial performance, risk management, and talent management as well. What that means is the Procurement Department’s evolution along that Procurement maturity curve needs to accelerate to support these strategic imperatives. In most cases, that translates into obtaining help from third party with some or maybe even all areas within procurement and strategic sourcing. But not only does it mean getting help, it means making sure the value is delivered and not just dumping work onto a supplier. Collaboration and management of procurement BPO relationships are critical to the Procurement’s mission.
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David Pastore

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