If we’ve learnt anything in procurement this year, it is that procurement and sourcing have been underestimated in terms of their contribution to the front-end of the business in an increasingly competitive market. Following the ‘horse meat’ scandal that affected many food retailers in Europe, and as Boeing recovers from the issues with Dreamliner, the importance of the supply chain has been brought into sharp focus.
Best in class organizations are therefore looking to tighten up their supply chain management to increase efficiency and reduce risk by covering their procurement and finance processes into an end-to-end Source to Pay (S2P) cycle, including sourcing and contract management functions to zero-touch requisitioning and streamlined order delivery and payment.
But at sharedserviceslink, we have noticed a number of organizations are finding this transition difficult given the increase of hybrid shared services models. In other words, functions and processes are disparately governed, by the business units, the shared services, and the company’s outsourcing providers. This is not only leading to confusion and inefficiency, but the longer outsourcing providers continue to focus on the purely transactional, the less likely their more strategic-thinking client are likely to renew contracts.
However, we’re seeing a distinct shift in the RFPs and conversations that some thought-leading outsourcing providers are having with their clients. This movement poses the question: why not outsource whole end to end processes?
Everest Group, an outsourcing research and advisory firm recently shared a research report that revealed a number of procurement outsourcing buyers are becoming interested in end to end outsourcing They report that, compared to a typical Accounts Payable only outsourcing, much more cost efficiencies can be derived by a S2P approach, through additional savings due to greater compliance, reduced spend leakage, significant reduction in maverick spend and streamlined end-to-end process reducing errors and profit leakage. For e.g., their estimates reveal that there is 70-75% additional saving potential by leveraging and end-to-end process driven approach to outsourcing P2P compared to piecemeal AP outsourcing.
Xchanging, for example, have taken a marked shift towards the more strategic services and we can report that they are witnessing a change in the client/ service provider relationship towards a more value-adding relationship.
The shared services community is also looking at a more holistic S2P process. The Hackett Group also noted a significant increase in organizations planning to include sourcing and procurement in their finance shared services in 2013, as compared to 2012.
Have you noticed this shift in the outsourcing market? What have your experiences of strategic outsourcing been? Get in touch to share your stories.
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