The Basics of Procurement Service Providers.
Procurement can be defined as the process of obtaining materials, supplies, services, and contracts with the highest level of qualitative services and the best total cost through open and fair competition.
The use of Procurement Services Providers is rapidly increasing due to global market conditions and the need for businesses to maintain and reduce costs without eliminating resources. Many world-class organizations have already contracted with Procurement Services Providers and estimates show that nearly half of U.S. companies are considering using Procurement Services Providers in the next five years.
A Procurement Services Provider should be a trusted Partner and should be an extension of your current team.
Read The Strategic Sourceror blog post to find tips for selecting the right Procurement Service Provider to compliment your organization.
Source One has been awarded the Supply and Demand Chain Executive 100 for several consecutive years. Please take a moment to see some of the industry recognitions that Source One’s spend management has received as a premier Procurement Services Provider.
Procurement Awards and Recognition
“Enterprises utilizing PSP’s have been able to improve spending coverage, reduce costs for goods and services, employ industry best practices, leverage the latest procurement technologies, and streamline source-to-pay processes – all without taking on the risks and assets required to achieve such results.” Aberdeen Group Research Abstract, “You Will Outsource Procurement: Here’s Why and How” – October 16, 2002
What is a Procurement Service Provider?
A Procurement Services Provider (PSP) is a third party organization or consultancy which is used to supplement internal procurement departments. PSP’s have their own staffing which assist in a variety of tasks for their clients. These tasks are based on the needs of the client organization, but may range from strategic sourcing, benchmarking, supplier identification to entire Procurement Transformation.
Why Use a Procurement Services Provider?
For most organizations, maintaining internal procurement expertise for across all areas of indirect and direct spend is costly and unnecessary. Using a PSP eliminates the burden of establishing and maintaining a Procurement infrastructure for categories that aren’t core to the business. For example, a Manufacturing company will most likely have a strong internal competency of the type of direct materials and suppliers necessary for their product. However, rationalizing telecommunications usage and understanding the intricacies of a telecom or wireless bill across various facilities may be outside of their Procurement team’s wheelhouse. One way a Procurement Services Provider can be leveraged is by supplementing existing Procurement operations by providing category-specific support.
In addition, a Procurement Services Provider can provide a rapid analysis of an organization’s spend, negotiate with suppliers, manage supplier implementations and proven industry best practices. A good PSP will act as an extension of the organization’s existing procurement resources, in a non-obtrusive fashion.
In a recent article titled “Strategic Sourcing in the Mid-Market: The Echo Boom in Supply Management”, the Aberdeen Research Group identified that Mid-Market companies have mostly fragmented or limited sourcing efforts. The report concluded that Mid-Market companies should have
“Increased reliance on third-party consultants to help define strategic sourcing process and train internal employees on commodity costing models, sourcing automation tactics, and category and supply market assessments.”
Additional research suggests, “enterprises that have outsourced management of specific procurement processes and/or categories of spending have been able to achieve material cost reduction that average between 10%-25%. In some cases, material cost reductions topped 30%.” – Aberdeen Group Research Abstract, You Will Outsource Procurement: Here’s Why and How.
How Do I Use a Procurement Services Provider?
Source One will be happy to meet with you to discuss how we may be of service to you. Keep in mind that you do not have to outsource your entire procurement function. Our Procurement and Strategic Sourcing experts will be happy to assist you in selected spend categories. Source One can work on a contingency basis, so there will never be any up-front fees.
What is Strategic Sourcing?
Strategic Sourcing is a process by which we harness the skills of the supply industry to optimize sustainable competitive advantage for the business and its customers.
Our process aims to develop a secure and responsive supply base capable of meeting current & future business needs in terms of: Quality, Delivery, Cost, Quantity, Technology, Flexibility and Service
What is Contingency-Based Strategic Sourcing and Procurement Services?
Source One offers one of the most unique business models in the industry. With Source One’s Contingency-Based Strategic Sourcing Services, our clients can pay us out of actual hard-dollar, tangible savings after they are obtained.
Click here to read more about our unique contingency-based business model.