In my previous blog post
I addressed the question of how Procurement needs to build and sustain capabilities.
There is a great deal to learn from best-in-class companies who are well on the road to strategic transformation of their Procurement functions. A lot of people have asked me the next question— Is it becoming easier or harder to get the necessary funding; and what can be outsourced?
Thankfully, funding is often not a problem as long as you have a business case for driving effectiveness and velocity. Anything that is non-core and low risk can be outsourced. In many cases, core “support” activities are also outsourced. Outsourcing is about cost optimization, spend reduction, improved metrics, improved process visibility and control.
Finance & accounting outsourcing has been going on since 1991; HR (Human Resources) and OM (Order Management) are being outsourced since the last decade. Procurement outsourcing gained momentum in 2005. In procurement, it’s mostly the indirect categories sourcing and related vendor management functions that are outsourced.
In my opinion, we need to profile categories and hence, category management on the basis of risk and spend. Low risk and low spend categories are good candidates for end-to-end source to pay management, while low risk, medium/high spend categories are good candidates for sourcing support.