Companies are reluctant to outsource their indirect procurement because they don’t believe providers offer a full service, according to the latest research by NelsonHall.
Its survey of 326 global organisations found that 50 per cent of firms would be “highly willing” to outsource their indirect procurement needs to a company that offered a total source-to-pay solution, but most vendors currently only offer parts of that service.
More than three-quarters of those questioned saw the main benefits associated with outsourcing indirect procurement as reducing purchasing process costs (84 per cent), accelerating sourcing cycle times (79 per cent) and improving the ability to manage supplier performance (78 per cent).
But NelsonHall, a business process outsourcing advisory firm, claims these can only be achieved if the service provider has control over the entire source-to-pay process, including sourcing, category management and the invoicing and payment processes.
“The greatest benefits will be seen in a full source-to-pay outsource, but most new signings are still source-to-contract or procure-to-pay awards,” said Rachael Stormonth, research director at NelsonHall.
“There is an incomplete understanding of how the potential business benefits can be achieved, which can lead to an over-cautious approach in the level of spend and the scope of activity being considered for transferring to an external service provider.”
Despite the benefits associated with outsourcing, fixing indirect procurement costs is not seen as essential in most companies. Only 23 per cent of firms saw reducing unauthorised spend on indirect goods and services as a priority, with many preferring to focus on implementing more effective vendor management systems through internal shared services centres.
The research also warns vendors to move from offering client-specific solutions to more standard models with common pricing structures and to develop a multi-shore delivery capacity.
“The vendor landscape remains under-populated, with few vendors currently possessing the deep procurement expertise, process knowledge and scale to manage a sizeable contract,” added Stormonth.
