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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