Executive Briefings

Use of Managed Service Providers May Help Keep Some Costs Under Control

As supply management organizations strive to extend their influence throughout the company and impact the bottom line with ever fewer resources, some are turning to managed service providers (MSPs) to make the best use of their organizations' time and talents. MSPs, sometimes called consolidators, can be used for certain spend categories, such as energy or telecommunications, that traditionally have been difficult for mid-sized procurement organizations to manage effectively.

Using MSPs increases visibility to the entire spend category, enables centralized performance tracking, and makes cost reductions and process improvements possible without excessively taxing limited supply management resources. There are some risks, however, and supply management professionals must perform careful due diligence before taking this path.

The categories most suitable for the use of MSPs generally share a set of common characteristics. For example, the category's supply base is greatly fragmented and there is a proliferation of local and regional players. The category tends to be somewhat complex in terms of service requirements and has a history of regulation and deregulation by the government. The spend category must not be a mission-critical activity for the enterprise. The category's billing system is complex and a solid cost-accounting approach has not been established.

Typically, the expenses associated with these categories are viewed as general and administrative or non-controllable costs.

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Keywords: supply chain, supply chain management, supply management, supply chain services, sourcing solutions

Using MSPs increases visibility to the entire spend category, enables centralized performance tracking, and makes cost reductions and process improvements possible without excessively taxing limited supply management resources. There are some risks, however, and supply management professionals must perform careful due diligence before taking this path.

The categories most suitable for the use of MSPs generally share a set of common characteristics. For example, the category's supply base is greatly fragmented and there is a proliferation of local and regional players. The category tends to be somewhat complex in terms of service requirements and has a history of regulation and deregulation by the government. The spend category must not be a mission-critical activity for the enterprise. The category's billing system is complex and a solid cost-accounting approach has not been established.

Typically, the expenses associated with these categories are viewed as general and administrative or non-controllable costs.

Read Full Article


Keywords: supply chain, supply chain management, supply management, supply chain services, sourcing solutions