How to Select a Procurement Services Provider?

Decisions... Decisions... 

As a Procurement Services Provider (PSP), our team is constantly engaged by companies of varying sizes representing a range of industries. They're all looking for one thing - strategic sourcing and procurement support.

In some cases, the organization has never worked with a third-party. Others are scarred by the experiences with PSPs who damaged their supplier relationships and charged outrageous fees for little-to-no implementation support. In both cases, the person on the other end of the line wants to know how Source One is different than other PSPs in marketplace.

While we don't end up working with every prospect, every one of these conversations provides an opportunity to shed some light on the ins and outs of the PSP landscape. Our hope is that, while an organization may not decide to work with Source One right now, they at least come away with a better understanding of how to select a PSP that suits their procurement team's needs. 

If you find yourself in the same boat - looking to learn how a Procurement Services Provider could enhance your current procurement capabilities, here are some themes that come up during our discovery calls:

Does a Procurement Services Provider replace our team? 

Not necessarily. While there are providers out there that allow you to completely outsource Procurement's workload, this isn't the only way to leverage a third party.

Our clients often choose Source One because we act as an extension to their internal team. For example, think of tricky spend categories like Marketing and IT. Your team knows the category might include impactable spend, but they likely don't have the internal category expertise (or even the time) to act on those savings opportunities.Our subject matter experts can help you target those areas of spend and establish sourcing best practices to ultimately give your business a boost.

Do Procurement Services Provider outsource to overseas resources?

There are procurement services providers out there that do outsource operations overseas. In some cases, this allows the PSP to keep costs low. This works well if you're looking for an inexpensive solution to your tactical procurement operations. This model may not be prove effective, however, if you're looking to tackle more strategic procurement initiatives, such as establish category management plans or transforming your procurement organization.

Source One doesn't outsource overseas. All of our resources are 100% onshore. We believe this allows us to better serve our clients by keeping the communication channels open, focusing on their unique needs, and providing quality service to produce results.

Are Procurement Services Providers compensated by the suppliers they recommend? 

Many Procurement Services Providers are simply re-sellers or agents for a selection of suppliers. Some will find you cost savings, bill you for their work, and ultimately collect and additional fee from the supplier as a commission. Procurement and sourcing service providers that are collecting revenue from both ends inherently have a conflict of interest and will always push their recommendation to maximize their own earning potential. Be sure to ask how your Procurement Services Provider is compensated.

Source One is supplier-agnostic. When we conduct sourcing initiatives, we do so with  100% objectivity. Our goal is to work collaboratively with our clients' procurement and category stakeholders to identify their requirements, select suppliers that meet their needs, and secure best-in-class contract agreements.

What is contingency-based cost reduction? 

In a contingency-based consulting agreement, work is performed through a gain sharing model. So, the end goal for both the consulting firm and its client is to maximize cost reduction while still maintaining or improving service levels and product quality. Contingency agreements typically bill at a percentage of savings dollars upon completion of a sourcing project.

What gets tricky about contingency-based cost reduction is how savings are defined. Some Procurement Services Providers will define savings as any opportunity they identified. When selecting a PSP to support cost reduction initiatives, be sure to ask how they define savings. In our contingency model, we only bill our clients based on realized savings. As such, we're invested in our clients' success and ready to offer long-term implementation support.

Want to learn more? Give us a call today.