Sourcing and Procurement Outsourcing: a Hybrid Solution
It’s time to look beyond the traditional BPO
The traditional BPO model for strategic sourcing and procurement is out of date and inefficient.The reasons to outsource strategic sourcing duties remain valid – getting access to a team of procurement subject matter experts with knowledge of the sourcing industry’s best practices, the lack of ROI associated with adding resources to manage every spend category, and the need to drive savings through headcount reduction of procurement resources, to name a few. But the service offerings provided by many of today’s sourcing and supply chain BPO’s do not properly address those needs in a way that still makes sense for most organizations.
The problem with the traditional BPO model for strategic sourcing is that it is not scalable – it simply trades your existing procurement resources for that of your service provider. Once initial savings are achieved within the strategic sourcing department, the business case for the BPO model goes away. The cost of the outsourced sourcing resources, however, does not, as many of these BPO contracts are for a minimum of three to five years. With high costs to implement the strategic sourcing BPO solution, Year One savings do not typically match expectations and rapidly dissipate once achieved. Sourcing BPO providers fail to maintain an objective ROI year-over-year, and CFOs and CPOs are starting to question the sourcing BPO business model. Top concerns with the traditional procurement BPO model include:
- An ROI/value by the sourcing BPO solution that is not as high as anticipated
- Long-term fixed cost structures that do not align with the current sourcing needs of the organization
- Sourcing BPO alternatives – solutions that are category-based, customized, and scalable – provide for higher savings and lower costs
- On-demand sourcing BPO alternatives allow companies the flexibility of shifting resources based on present procurement needs
Best-in-class organizations have been trending away from the traditional Source-to-Pay BPO model when outsourcing strategic sourcing. Having 100% access to a large pool of sourcing professionals is not needed because, once sourcing for a category is complete, the need for the ongoing resource is greatly reduced until a contract comes up for renewal again. Customized, scalable strategic sourcing outsourcing solutions – where resources go where they are needed and are not long-term fixed expenditures – tend to provide higher ROI in terms of overall savings as well as costs. These flexible, on-demand procurement outsourcing models are also typically more aligned with a customer’s needs, as they are adaptable and flexible, providing access to on-demand, real-time market insight and the ability to rapidly deploy third-party sourcing resources where they are needed the most.
We understand that a strategic sourcing BPO model must be adaptable to the needs and objectives of the individual client. Source One aligns our metrics to those of our clients – our third-party strategic sourcing programs providing a scalable set of procurement resources that maximize savings without the need for ongoing, long-term fixed costs. Our pool of strategic sourcing subject matter experts are U.S.-based, and focused on providing on-demand support for your procurement objectives by identifying savings opportunities, capitalizing on economies of scale, then moving to the next area of opportunity.
At Source One, we believe strategic sourcing and procurement groups are more than just bid administrators or corporate negotiators. Best-in-class companies use their sourcing groups strategically, gaining a competitive advantage in the industry and using them to gain access to new products and innovation, optimizing supply chains, and exploiting capacity restraints to disrupt competition. Our strategic sourcing solutions provide the tools and technologies, best practices, and market intelligence to ensure our clients stay ahead of the curve.