Are you looking to streamline operations, improve procurement delivery, and generate savings?
If so, you’re not alone.
Procurement has become such an integral function of every enterprise warranting its own staff and strategy.
Unsurprisingly, however, numerous SMEs are struggling to keep up with the ever-changing demands and nature of the industry, resulting in them turning to third-parties for help.
These independent organizations that SMEs turn to go by the name of ‘procurement service provider’ or (PSP). They can be brought on ad hoc to supplement in-house procurement efforts or to take over completely.
Now, you may be wondering if your business really needs a PSP.
Why You Need a Procurement Service Provider
The top three reasons most businesses reach out to PSPs are as follows:
Reason 1: To bring onboard tactical labor
Procurement is a strategic operation that requires careful planning and the use of best practices in order to effectively meet demands and keep spending at a minimum.
Hiring full-time qualified personnel can be exceedingly expensive for start-ups and mid-size companies. Procurement service providers then become an attractive viable option.
Reason 2: To provide supply chain management
Disruptions in the supply chain can affect performance along the value chain and lead to costly delays. Procurement service providers can help because they have the technical expertise essential for smooth operations. In addition, they can also negotiate with suppliers.
Reason 3: To analyze spend and propose mitigation strategies
Did you know that 59% of enterprises that outsource services reduce overall expenditure? Being able to keep running costs low is at the top of the agenda for many businesses. PSPs can analyze internal tail spend and devise customized cost reduction solutions.
Now, let’s look at a step-by-step formula that can guide you on how to choose a procurement service provider.
4 Steps to Selecting a Procurement Service Provider
Step 1: Establish your level of need
A company’s procurement efforts are only as strong as the team behind them.
In which areas is your current procurement team lacking? What skill sets are you missing that would significantly boost procurement?
By taking time to assess the strengths and weaknesses of your current team, you’ll be better positioned to see what talent and or skills you should hire.
This then leads us to the next point.
Step 2: Determine the desired level of PSP involvement
Based on the first assessment, you can now determine the type of collaboration you wish to have with the procurement service provider.
This is, do you wish this third-party to come in simply to supplement, support, and complement your existing team, or do you wish to completely outsource all your procurement needs to them?
Whichever option you pick, the next consideration is whether you will keep PSP operations offshore or onshore.
Step 3: Consider offshore or onshore PSPs
Outsourcing offshore makes financial sense for many enterprises. According to Statista.com, in 2020, the global business process outsourcing industry was valued at $92.5 billion.
A lot of the administrative tasks that can be done remotely are being offered to overseas professionals. While the more practical aspects of procurement such as the sourcing process are being handled by local onshore PSP.
Step 4: Evaluate PSP affiliations
It is worth mentioning that some procurement service providers act like brokers linking sellers and buyers together. They receive a commission on both ends thereby introducing partisanship in their service offering.
It goes without saying that when a PSP is involved in such dealings, there will be bias. Discuss PSP affiliations with your shortlisted candidates in order to make an informed decision on who to choose.
As with any hiring decision, take your time. The ideal procurement service provider will be worth their weight in gold. By following our strategy, you’ll sift through the various PSPs with greater ease and dexterity.