Should my business outsource its procurement?

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Backed by close to 30 years of combined procurement experience in the public and private sector, R2S directors Ryan Jackson and Heath Jess have seen many businesses come around to the idea of outsourced procurement.

According to Heath, however there's still a long way to go.

"Procurement is still viewed as a service that businesses need to deliver themselves. Ten years ago it was the same for HR, IT, finance. But while certain elements of the supply-chain function do need to remain in-house, procurement and contract management can be outsourced."

"I don't believe outsourcing of a procurement function is a good idea for all organisations. There are many high performing procurement teams that companies should aspire to build for their own organisation; however, building a high performing and sustainable in-house procurement team can be challenging and it is not always the most economical decision for an organisation to make. There is a real opportunity for organisations to leverage high calibre procurement teams via an outsourced model without the recurring overhead of a full-time procurement function."

So, what's keeping businesses from making this shift and what are the benefits of an outsourced procurement model? We sat down with Heath to find out.

R2S’s approach to outsourced procurement

How is an outsourced procurement model different to what your business is likely already doing?

According to Heath, "Where we add value is the ability to leverage the experience, capability and capacity of the entire R2S Team to deliver specific procurements. The other benefit is that you only pay for the resourcing you need to deliver specific procurements or procurement program resulting in a significant saving on resource costs”.

Businesses usually seek outsourced procurement services "for major projects, where there's a high risk to delivery of the procurement from a knowledge and experience, or time perspective," explains Heath. "That can be everything from delivery of a major construction transaction to management of a high-risk supply contract to ensure adequate implementation and management of external parties."

The benefit of engaging with professional procurement consultants is that you have access to their massive wealth of professional experience and high-calibre resources. They'll know exactly how to deliver your procurement requirements based on the firm's collective expertise and proven procurement methodologies.

This illustrates one of the benefits of moving to outsourced procurement - you don't need to make the shift all at once.

"Our work usually starts on an individual contract package or project level, delivering one major project and that eventually leads to others," says Heath. "If you have an experienced procurement team already, it can be difficult to flip the switch to an outsourced model, so generally businesses will seek assistance for particular programs or contracts and shift over slowly, growing from there based on performance. It is also possible to pilot outsourced procurement on a critical project or initiative, to see whether their organisation would benefit from an outsourced model."

What are the benefits of outsourcing your procurement function?

In recent times, Heath has seen a greater willingness for organisations of all sizes to move towards an outsourced procurement model.

"While businesses used to accept delays from the procurement function as business as usual, there's now a much stronger focus on performance and accountability. Businesses are now more willing to challenge the norm and say, 'Okay, the current process it isn't working - how can we fix or change this? What are the options available?' and outsourcing is becoming much more viable."

Start-ups and new companies are also more likely to outsource their procurement by leveraging a shared procurement workforce on an as-needs basis.

As Heath explains, "These businesses are purely focused on their core service and it makes sense for them to focus their budgets and resource profiles in that direction."

It's not just start ups and SMEs who should think this way - anywhere overall business performance is impacted, outsourcing should be considered. Heath describes three key benefits of letting a company like R2S handle your procurement needs:

1. Higher standards

As with all services, your business' procurement needs to be delivered at a high level. When you outsource, you can meet that requirement by setting Key Performance Indicators (KPIs) for the service and hold the procurement partner accountable - something that can be difficult to do to with the politics of dealing with an internal function.

2. Lower cost

It's easier to efficiently manage the cost of an outsourced model because you can ramp-up / ramp-down resources based on your real-time requirements. There is no need to pay for unproductive time that may be experienced with full-time employees.

3. Different delivery models

By working with professionals that have experience across multiple industries, you'll be able to benefit from the implementation of broad knowledge of the supply market and current procurement trends all in order to find the most efficient, cost-effective solutions. Outsourced procurement can be much more nimble, especially because of the ability to match experience and capability with a particular project.

Thinking about outsourcing any aspect of your procurement services? Reach out to the team at R2S today to find out how we can help. 

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