Procurement Ootsourcing Emerging Opportunity At Iimm Bangalore

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Procurement Outsourcing, compared to the more established practices in finance, accounting and HR, relatively new area that has been garnering significant attention because of its ability to have a much larger impact on an organization

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Procurement Ootsourcing Emerging Opportunity At Iimm Bangalore

  1. 1. TM Synergy Think beyond boundaries… One-Stop-Shop for Sourcing and Procurement13/27/2011 http://www.strombus.in/
  2. 2. Procurement Outsourcing Emerging Opportunities23/27/2011 http://www.strombus.in/
  3. 3. Procurement Outsourcing Emerging Opportunities • Introduction • Procurement as Core Business "Is procurement core?" Theres only one correct answer, yes? • Procurement shifts from Traditional to Contemporary! • Why companies outsource – Value Proposition • Ideology vis-à-vis Integrity33/27/2011 http://www.strombus.in/
  4. 4. Procurement Outsourcing Emerging Opportunities Introduction Outsourcing • Reduce and control operating costs • Improve company focus • Gain access to world-class capabilities • Free internal resources for other purposes • A function is time-consuming to manage or is out of control • Insufficient resources are available internally • Share risks with a partner company43/27/2011 http://www.strombus.in/
  5. 5. Procurement Outsourcing Emerging Opportunities Introduction Procurement Outsourcing (PO) • Increasing Effectiveness of Procurement • Partnering with someone who expert in procurement & sourcing • Availability of Temporary Resources to fulfill Temporary requirement • Expand the variety and looking for established sourcing arrangements • Innovative approach to manage and visualize Spend • PSPs insights, analysis and recommendations to procurement to assist in developing corporate supply and sourcing strategies, savings targets, savings analysis and other special programs • No compromise on basic philosophies of Procurement53/27/2011 http://www.strombus.in/
  6. 6. Procurement Outsourcing Emerging Opportunities Introduction PO - Least Understood Area • PO is one of the least-understood area, but awareness is increasing through both growth in the sector and an increasing body of research and articles • PO, compared to the more established practices in finance, accounting and HR, relatively new area that has been garnering significant attention because of its ability to have a much larger impact on an organization63/27/2011 http://www.strombus.in/
  7. 7. Procurement Outsourcing Emerging Opportunities Introduction PO – incomparable effects • According to studies conducted by different analyst firms including IDC, Procurement outsourcing is growing faster than IT services, Finance and Accounting and HR outsourcing. Reason, see the effect of PO: 20% 18% Procurement Outsourcing 16% 14% Human Resource Outsourcing 12% 10% F & A Outsourcing 8% 6% Customer Care Outsourcing 4% 2% IT Outsourcing 0% 2005 2006 2007 2008 200973/27/2011 http://www.strombus.in/
  8. 8. Procurement Outsourcing Emerging Opportunities Introduction PO – an emerging opportunity Spend matters……..so is procurement outsourcing a strategic imperative? • Market indicators strongly suggest that procurement outsourcing is at an inflection point and will be a prominent strategy in 2011. • Attitudes about procurement outsourcing are changing, confidence and acceptance are rising, and so is contract activity.83/27/2011 http://www.strombus.in/
  9. 9. Procurement Outsourcing Emerging Opportunities Introduction PO – Rising Sun • From conversations with sourcing advisors such as TPI we hear that there has been a dramatic increase in the number of procurement outsourcing deals signed in 2009. • TPI measured 83 contract signings in 2009 – the most on record in any single year. Large contracts, those with total contract value (TCV) of $25 million or more, increased 25 percent to their second-highest level ever. • What is potentially an even more compelling finding is that there was a 43 percent increase in smaller contracts, and these engagements tend to expand year over year to become larger contracts. This is as per one of reports in Procurebuzz93/27/2011 http://www.strombus.in/
  10. 10. Procurement Outsourcing Emerging Opportunities Introduction BPO & KPO • As per DNB after BPO, KPO Knowledge Process Outsourcing is gradually unfolding next great opportunity for India. • In fact India, with its abundant skilled resources and competitive cost advantage is all set to bank on this next big thing. • The KPO requires domain knowledge, analytical skills and decision making capabilities. • KPO is defined as high end knowledge work which includes equity & finance, intellectual property rights, analytics, business research, market research, investment analysis, data management etc.103/27/2011 http://www.strombus.in/
  11. 11. Procurement Outsourcing Emerging Opportunities Introduction PO – an emerging trend • One of it’s Emerging Vertical is Procurement Outsourcing (PO). • Indian BPO companies are gearing up for PO boom to tap the potential of the segment due to its competitive advantage.11 Procurement Core3/27/2011 http://www.strombus.in/
  12. 12. Procurement Outsourcing Emerging Opportunities Challenge The biggest challenge for the procurement manager is the attitude of the management “Why care about procurement”. There is need to discover and realize areas of left over potential avenues. Some of them: • Transparency – lack of consistent, timely and accurate information • Skills – inadequate category-specific sourcing buying expertise • Resources – lack of investment or executive sponsorship for corporate procurement control123/27/2011 http://www.strombus.in/
  13. 13. Procurement Outsourcing Emerging Opportunities Procurement as Core Business "Is procurement core?" Theres only one correct answer, yes? If only it were that simple! • While there is little debate that procurement is important, whether the function and profession in their current states are truly core is comparatively murky depending on whom you ask. • In the eyes of many insiders and observers, talent and investment should be top priorities to ensure that procurement is perceived as core to the business. • It is an area requiring judgment, cross-functional coordination, proactive risk and change management. • Core function is something that brings distinctive competitive edge to a corporation and is something the corporation does distinctively better than the next guy133/27/2011 http://www.strombus.in/
  14. 14. Procurement Outsourcing Emerging Opportunities Procurement shifts from Traditional to Contemporary! The traditional purchasing process • The traditional purchasing process involved several steps—requisition, soliciting bids, purchase order, shipping advice, invoice, and payment— that have come to be increasingly regarded as unacceptably slow, expensive, and labor intensive. • Each transaction generated its own paper trail, and the same process had to be followed whether the item being purchased was a box of paper clips or a new bulldozer.143/27/2011 http://www.strombus.in/
  15. 15. Procurement Outsourcing Emerging Opportunities Procurement shifts from Traditional to Contemporary! Contemporary • That attitude has changed in recent years, in part because of highly publicized cases wherein companies have achieved stunning bottom-line gains through revamped purchasing processes. • In addition, increased competition on both the domestic and global levels has led many companies to recognize that purchasing can actually have important strategic functions. • As a result, new strategies are being used in purchasing departments at companies of all size.153/27/2011 http://www.strombus.in/
  16. 16. Procurement Outsourcing Emerging Opportunities Procurement shifts from Traditional to Contemporary! Contemporary • Analysts observe that in this new purchasing environment, a guideline known as the total cost of ownership (TCO) has come to be a paramount concern in purchasing decisions. • Instead of buying the good or service that has the lowest price, the buyer instead weighs a series of additional factors when determining what the true cost of the good or service is to his or her company. To lower TCO, companies are taking a number of steps to improve purchasing163/27/2011 http://www.strombus.in/
  17. 17. Procurement Outsourcing Emerging Opportunities Procurement shifts from Traditional to Contemporary! Shift to strategic sourcing • Strategic sourcing is one of the key methods that purchasing departments are using to lower costs and improve quality. • Strategic sourcing involve – analyzing what products the company buys in the highest volume, – reviewing the marketplace for those products, – understanding the economics and usage of the supplier of those products, – developing a procurement strategy, – establishing working relationships with the suppliers that are much more integrated than such relationships were in the past173/27/2011 http://www.strombus.in/
  18. 18. Procurement Outsourcing Emerging Opportunities Procurement shifts from Traditional to Contemporary! Empowering teams In addition to strategic sourcing, there are other methods companies can use to improve purchasing!! • Creating cross-functional teams that involve purchasing personnel in every stage of the product design process. • In the past, purchasers were not involved at all in the design process. They were simply instructed to purchase the necessary materials once a new product had been created.18 Value Proposition3/27/2011 http://www.strombus.in/
  19. 19. Procurement Outsourcing Emerging Opportunities Why companies outsource Value Proposition • Specialized procurement service providers are dedicated to procurement and have developed a strong expertise in procurement and procurement outsourcing • Economic Improvement – Reduction in Purchase and Operation Cost – Substantial and sustained savings – Increased spend leverage and control193/27/2011 http://www.strombus.in/
  20. 20. Procurement Outsourcing Emerging Opportunities Why companies outsource Value Proposition • Service Improvement – Innovate procurement practices – Timely Deliveries • Spend Management – Prior planning – Minimize the effects of unpredictable economy – Strategic sourcing process – Identify opportunities for savings – Make the Spend more visualized – Enhanced Decision Making203/27/2011 http://www.strombus.in/
  21. 21. Procurement Outsourcing Emerging Opportunities Why companies outsource Value Proposition • Market Intelligence – Enrich the base information – Internal and external market research – Actionable intelligence • Risk Administration – Controlling and minimizing uncertainties – Leverage to the organization to focus on deliveries and implementations – Improved contract compliance – Reduced amount spend that non purchasing staff handles213/27/2011 http://www.strombus.in/
  22. 22. Procurement Outsourcing Emerging Opportunities Why companies outsource Value Proposition • Purchase analytics – Data Collection – Cleansing – Classification – Reporting / Analysis • Business Intelligence – Benchmarking – Critical to Quality (CTQ) – Alerts & Alarms – Work flows with escalations – Auto redemption of processes – Self audits223/27/2011 http://www.strombus.in/
  23. 23. Procurement Outsourcing Emerging Opportunities Why companies outsource PO Benefits Improved Spend 44% Visibility Market & Supplier 46% Intelligence Head Count 46% Reduction Lower 47% Procurement Cost Improved Pricing 56%23 Ideology / Integrity3/27/2011 http://www.strombus.in/
  24. 24. Procurement Outsourcing Emerging Opportunities Ideology vis-à-vis Integrity Ideology • Outsourced procurement teams allow companies to benefit immediately from experienced procurement specialists support & expertise. This avoids the creation of an internal team (new resources) and the required time for that team to structure itself, its processes and its expertise.243/27/2011 http://www.strombus.in/
  25. 25. Procurement Outsourcing Emerging Opportunities Ideology vis-à-vis Integrity Integrity • This is bread and butter, how can PSP compromise on the outputs by looking on the short term profit in place of making long term relationships.253/27/2011 http://www.strombus.in/
  26. 26. Procurement Outsourcing Emerging Opportunities Ideology vis-à-vis Integrity Integrity • There are means and methods, if laid down properly, the chance of loosing confidentiality can be tracked and it will be maintained intact • The PSPs interested to create a faith and they understand the need, they are not interested in loosing the name because of short term benefits263/27/2011 http://www.strombus.in/
  27. 27. Procurement Outsourcing Emerging Opportunities Ideology vis-à-vis Integrity Integrity • The process is so transparent that it enable the partners to look into the activities and intervene wherever needed. The client is having all the detail transactions available at the same time, the vendors are being communicated with all the contact information about the client.27 Strombus3/27/2011 http://www.strombus.in/
  28. 28. Strombus Think Beyond Boundaries… Ideology, Integrity and Process • Reliability • Ethical practices • Continual improvement • Competitiveness • Work Experience • Process Focused Not Tool • Indirect Spend – End to End (P2P) • Direct Spend – Spend Management28 Future of PO3/27/2011 http://www.strombus.in/
  29. 29. Future of PO The Everest Group indicates that the future of Procurement Outsourcing in India is tightly coupled with the global trends within the segment. Throwing light on the segment it states the following: • Global Procurement Outsourcing suppliers are beginning to utilize their India-based centers to absorb a bulk of the transactional procurement work • Given the strong BPO support infrastructure that India has, it is also an emerging destination for tactical sourcing and spend analytics • Managing and hosting of procurement solutions is yet another big opportunity. • Analysts also believe that PO is not just about deriving the labor arbitrage advantage, but also gaining access to a host of specialized manpower skills.293/27/2011 http://www.strombus.in/
  30. 30. Future of PO Going forward, what Indian ITES-BPO companies need to build, in order to address the PO opportunity are as follows: • Partnerships with Category experts and sourcing managers in India • Indian universities that offer a procurement focused curriculum • A network of alliances in tools and technologies • Partnerships with aggregators • Mature outsourcing methodologies and ability to use offshoring capabilities for cataloging, contract administration and procurement Help Desk30 Thank You3/27/2011 http://www.strombus.in/
  31. 31. Future of PO Indian companies can utilize in house support of PO and explore opportunities: • The companies who have no internal competencies but want to quickly benefits from procurement action (Cost reduction, suppliers and contract management...) • The companies who have internal procurement expertise (department) but want to outsource activity on specific areas like indirect materials and services • The companies who want to develop quickly a procurement function to deliver savings, with a willingness to internally develop this function in the mid term31 Thank You3/27/2011 http://www.strombus.in/
  32. 32. 323/27/2011 http://www.strombus.in/

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