The inability of organizations to fully take advantage of technology due to capacity and resource constraints is one of the driving forces behind the managed services movement. According to Technavio, the global market for managed services is expected to grow more than 12 percent over the next three years, topping $190b by 2019. For most procurement organizations, technology has been a major catalyst of success – and that won’t change anytime soon. But there’s still room for growth.
This is where managed sourcing services come into play. For those not familiar with the approach, it’s when an outside partner works in tandem with the internal procurement team to execute the day-to-day responsibilities of a sourcing program while simultaneously acting as a strategic advisor to the procurement organization. This third-party team of experts brings their own resources, knowledge and expertise to the table, working side by side as an extension of the internal procurement team to make operations more efficient, effective and agile.
The consultative approach ultimately takes the bulk of the work off the internal team’s plate, since managed sourcing partners help with program planning and training and also handle the tactical side of administrative duties and running events. The biggest benefits for internal procurement departments, though, is being able to do things faster – managed sourcing partnerships solve scalability issues. For example, if there’s a category that needs to be taken to auction, or a new project initiative that needs to get off the ground, there’s never a question of whether it’s possible due to time and resources.
Case studies in managed sourcing: overcoming challenges with a holistic, consultative approach
Consider a company that is looking to increase visibility into its supply base. They want deeper insight and control over negotiated pricing, terms and service levels available to them. A managed sourcing partner can help this company’s internal sourcing team bring a variety of categories to auction by discovering new category opportunities, assisting with defining product specifications, developing event calendars and identifying suppliers to invite to bid. With this type of category consulting, the company gets the best value available to them – the products they need at a lower price, higher quality and verified service levels -- and ultimately turn complex categories into productive events.
Another company may want to adopt an enterprise-wide sourcing strategy that fits into their current business processes, increases their overall effectiveness and saves time and internal resources. Managed sourcing helps these teams do more with less by supplementing the internal team with an extension of their staff. These partners take the heavy lifting of running events – data entry, setting up and executing RFx -- off the plate of internal teams. This allows them to reach more spend areas and broadens their sourcing capacity so they don’t need to reallocate resources, hire additional staff, or radically change their processes. They can now focus on strategic elements of the program, including front end benchmarking, negotiation, program development and back end contracting rather than on the tactical, administrative tasks that take up a lot of time.
Taking the first step: what to look for in a managed sourcing partner
When looking at potential sourcing partners, there are a few key considerations to keep in mind to help decipher whether you’ve found the right fit for your business:
Do they have experience in your particular industry?
Every sector has unique challenges and nuances that shape its landscape. A sourcing partner should know your space inside and out and offer real-time guidance that helps navigate these pressures effectively and secure stronger savings results that tie back to overall business goals.
Do they know the top suppliers in your space?
For many businesses, suppliers are the lifeblood of the company. The right partner will work for your suppliers and give them the support they need so they’re prepared for auctions. They will also invite the strongest suppliers to bid so you have more opportunities for finding unique supply sources that will differentiate your brand and increase customer satisfaction.
Are they both tactical and strategic?
A managed sourcing partner should be able to provide value across all aspects of running events and with strategy and planning. From education, training and establishing project plans and evaluation criteria to facilitating supplier onboarding, buyer orientation and defining product specifications, a managed sourcing provide should do it all, and work by your side, all while leveraging your internal knowledge base and expertise.
Are they flexible?
A good provider will work with you to reach your goals and overcome your most pressing challenges. They fit to what you want and need, with no compromise on your part. If you find you are being pressured to change your vision in order to secure their business, keep looking.
Can they source both direct and indirect categories?
A sourcing partner should be able to source anything you can spec and go beyond the basics to offer creative solutions for even your most complex categories. Sometimes the most unexpected categories bring in the most impactful financial results. You want a partner who can work with you to generate this value in any project, whether big or small, complex or simple, direct or indirect.
What does their track record look like?
Before entering into any business partnership, you should look at the other party’s history of proven success. Reviewing customer case studies and testimonials will help you identify if you are in their sweet spot, which will give you a better idea of whether they are really able to meet your needs and steer you on the path to long-term success.
Does their timeline for success align with yours?
Look for a partner who can get you up and running with running successful events in weeks, not months. Technology implementation should be quick and easy, with comprehensive support offered whenever you need it. If the learning curve or adoption process looks steep, it’s best to look elsewhere.
Despite the technological advancements we have experience over the past decade, we still need savvy people and solid processes in place to use these tools effectively and deliver results that generate real value for the organization. Technology today can not anticipate needs or offer real-time guidance – at least, not like a human could -- to help teams overcome challenges.
Many vendors talk about the people, processes and technology methodology, but it really rings true with a managed services approach – by combining these three elements in the right way, teams can drive value that shapes the future direction and growth of the organization.
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