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key decisions for procurement professionals

 How to balance internal and
 external service provision
 Peter Smith
 Managing Editor Spend Matters UK/Europe
 February 2012




services for professional procurement
www.achilles.com
Balancing internal and external service provision –
key decisions for procurement professionals
A Spend Matters White Paper sponsored by Achilles




Executive summary
Spend Matters observes trends in procurement
carefully, and there is no doubt that the pace of
change facing senior management is increasing given
globalisation, supply chain risks and challenges, and
the pressures on organisations to perform. This paper
contains important messages, bringing together our
thinking in two key areas with important implications for
senior procurement practitioners.
1.	 One of THE most important roles for             2.	 Supplier Information Management is a powerful
    Procurement Leaders (CPOs and similar) today        example of a capability that can be provided
    is to optimise the use of resources from both       effectively from outside the organisation, yet
    inside and outside the organisation, blending       contribute greatly to successful delivery of
    them successfully to achieve their goals.           procurement objectives for the in-house team.




                                                                                                         2
How to balance internal and external service provision
    – key decisions for procurement professionals
    A Spend Matters White Paper sponsored by Achilles




    In the first section of the paper, we explain:            ‘candidate’ for external service provision, with
    ƒƒ How and why procurement executives need to             significant benefits available to organisations
       become adept at using third parties to deliver         who follow this route.
       some of the tasks necessary for the function’s      Part 1 Balancing internal and external
       success.                                            procurement delivery
    ƒƒ The various reasons and justifications for using    1. Introduction
       third parties, such as economies of scale,          If we go back 30 years or so, to the beginning of
       expertise and leverage.                             the author’s business career, virtually everything
    ƒƒ How CPOs can evaluate and prioritise the use of     that was done by a procurement function or
       third parties for procurement services provision    department was carried out by the internal staff
       to steer them towards the right ‘blended’           employed by the organisation. There was little
       solution.                                           in the way of computerisation; management
    While large-scale end-to-end outsourcing of            consultants were still a fairly exotic breed; and while
    procurement has not spread in the way many             there were other professional service providers in
    analysts predicted ten years ago, there are,           certain business areas already well established
    nevertheless, many opportunities for organisations     (such as consumer market research firms), there
    to engage third party providers to supply elements     was little of that nature in the procurement space.
    of the overall procurement process – it doesn’t        But gradually this has changed. There are now a
    have to be all or nothing. There has been a visible    wide range of providers all positioned to assist the
    growth in the number of organisations using            procurement executive achieve his or her aims.
    external providers for certain spend categories;       However, in recent years, some commentators
    or elements of their more transactional P2P            have suffered from over-excitement about
    processing work; or indeed valuable specialist         trends, and proclaimed that full procurement
    elements of the overall process such as Supplier       outsourcing was ‘about to take off’. The reasons
    Information Management, which is discussed here        given by analysts for this statement have always
    later. The opportunity to integrate internal and       seemed convincing; economies of scale, allowing
    external service provision is considerable and is      organisations to focus on core business, and
    likely to lead to significant benefits compared to a   others. But stubbornly, year after year, the
    service delivered purely with internal resources.      procurement ‘business process outsourcing’
    In our second section, we look in more detail          (BPO) market grows very slowly. As AT Kearney
    at Supplier Information Management (SIM), an           said in their ‘Procurement Outsourcing1’ note,
    umbrella term embracing the collection, evaluation     “Despite a substantial growth in outsourcing in the
    and monitoring of all information on suppliers         past several years, procurement outsourcing is
    and contractors including risk evaluation, vendor      less than two percent of all outsourcing activities”.
    appraisal and performance management.                  That’s not to say that firms ranging from Infosys to
    We explain;                                            Xchanging, IBM to ICG Commerce haven’t made
                                                           some progress and picked up some good clients
    ƒƒ Why SIM is increasingly important to
                                                           along the way. But the market certainly hasn’t
       organisations, given the need to manage
                                                           developed in the way that, for instance, IT or Payroll
       suppliers more professionally and mitigate the
                                                           services outsourcing have done.
       ever-increasing volume and scale of risks in
       global supply chains;                               However, it is our hypothesis that procurement
                                                           has actually taken a more subtle route to greater
    ƒƒ The role of SIM in both the transactional and
                                                           utilisation of third party service providers to
       strategic sourcing cycles; and
                                                           support its own activities. Leading procurement
    ƒƒ Why SIM is often a strong and positive              practitioners are taking much more advantage




3   1. http://www.atkearney.com//index.php/Publications/
    procurement-outsourcing.html
of external service provision than a decade ago;        Leverage expertise, address shortage of
but it has not been the full outsource route that       internal skills
has generally been chosen. Rather, they have            Organisations may suffer from a lack of particular
looked carefully at which elements of the overall       expertise in certain areas, whether that means
procurement process and set of responsibilities         specific spend categories or other areas; perhaps
make most sense to acquire externally, rather than      technical skills relating to technology, or skills in
deliver internally.                                     finance, and market analysis etc. It may be that
One reason for this may be the understandable           the issue is driven by local skill shortages; or more
reluctance of procurement professionals to hand         often it is not economic for an organisation to pay
over their entire commercial sovereignty to an          what is needed to get true experts in all the internal
external provider, with the perceived danger of         roles.
losing control of strategic supplier relationships.
However, they see no such threat in buying
                                                        Reduce internal costs (labour arbitrage)
external information or tools to support elements
                                                        If this last example is about getting more capability
of their overall activity and process, where external
                                                        for the same price, in this case we are looking
provision can add value without major risk.
                                                        at finding cheaper resource to deliver perhaps
                                                        a similar level of performance. Offshoring to
2. Why use third parties?                               lower-cost countries is the classic example here;
Let’s go back a step and look at why organisations      originally we saw this in what were perceived as
might use an external service provider for some of      activities of a lower added value nature, such as
their procurement activity, rather than delivering it   P2P processing, catalogue management. But
internally. These are the key drivers that tend to be   increasingly this may include more skilled work
used in justifications and business cases for taking    including sourcing or technology development.
that step.


Leverage volume / collaborate
Approaching the market with a greater volume of
spend will, all other things being equal, enable
better value to be obtained. So transferring
responsibility for the actual procurement of certain
spend categories to a provider who can aggregate
volume from a number of clients – and perhaps
include their own internal spend in the total – may
enable all those customers to benefit from better
results than they could obtain as individuals. But
this driver is not merely about leveraging spending
for lower prices. As well as outsourcing actual
direct ‘buying’, there are other activities, as we
will see later, that it may be uneconomic for an
organisation to perform individually, but become
affordable when executed in collaboration with
others.




                                                                                                                 4
How to balance internal and external service provision
    – key decisions for procurement professionals
    A Spend Matters White Paper sponsored by Achilles




    Sort out broken processes                                        or outsourcing all indirect spend categories. But
    Perhaps a less common driver for outsourcing is                  at the less dramatic end of the range, we can
    as a response to ‘broken processes’ internally.                  consider external provision of much smaller
    While most experts will advise organisations to fix              elements of the overall procurement task.
    processes before outsourcing, and this is good                   This is not generally termed “outsourcing”,
    theoretical advice, in some cases the organisation               although it shares some of the same
    may simply not have the time, ability or resource to             characteristics. And it is not about transferring core
    do this. In such cases, the outsourcing may enable               responsibility out of the organisation; it is about
    benefits to be gained through the provider’s ability             gaining additional expertise and resource from
    to do the work better and pass on some of the                    outside to support the key functional activities.
    benefits. The bottom line, according to Horses for
                                                                     The type of activities and responsibilities that
    Sources2, is that organisations, tend to outsource
                                                                     organisations might look to obtain from external
    processes that probably aren’t very well run in the
                                                                     providers are described in the next section. But
    first place.
                                                                     their range, importance and the opportunity they
                                                                     provide for improving procurement performance is
    Focus on core business                                           very significant; a fact that many organisations and
    Organisations may decide that certain activities                 leaders have not, in our opinion, fully appreciated.
    are distractions to their ‘core business’. While this            As a consequence, we’ve come to this view.
    is often linked to the lack of skills described above,
    it may be independent to that and be a judgement                  One of the most important roles for Procurement
    that passing responsibility to an external body will              Leaders (CPOs and similar) today is to source,
    free up management time and focus to concentrate                  manage, combine and blend capabilities and
    on whatever is defined as “core”.                                 resources successfully, from inside and outside
                                                                      the organisation, to achieve their goals.
    3. The growth of procurement service
    providers                                                        4. Prioritising the options for third-party
    The typical procurement function in a large                      provision
    organisation will almost certainly have many more                So if this is a key role, how should a procurement
    activities performed by third parties than there were            executive determine what can most productively
    ten years ago. There will be technology platforms                be delivered by third parties? We recommend a
    in use, probably with external support or consulting             structured analysis of the range of options available
    around their use and every chance there will be                  across the whole procurement landscape; but in
    some consultancy involvement somewhere around                    our experience, very few organisations carry out
    the function; research, benchmarking, networking                 this sort of consideration. Decisions are made
    or information service providers will feature.                   on an ad hoc basis, or those driven by a crisis or
    There are now many options and opportunities                     perceived crisis in a particular area. It is clearly
    within the overall procurement process to consider               better not to wait until events dictate hasty action,
    third-party delivery of services that contribute to              so we recommend strongly a pro-active approach
    overall procurement effectiveness. At one extreme                to evaluating the options and structuring the best
    there is full BPO type outsourcing; perhaps                      mix of provision.
    moving all P2P activities to an external provider;




5   2. Horses for Sources. The undisputed facts about outsourcing.
    May 2011
Stage 1
The first step is to identify work currently            information, or data that may form part of the
undertaken and develop a map of the processes           qualification and supplier selection process – it is
and activities undertaken by the procurement            also an intrinsic part of that process.
(and related) functions. This does not need to be       Similar analysis might cover support areas within
broken down into every detailed step, but should        procurement, or the human resources aspects;
be considered at a level that relates to how the        do we want to manage recruitment and training
market might offer to provide such services.            internally or use external experts for instance. But
For example, consider the P2P (purchase to              the key is to identify a range of options in the first
pay) process. As well as the option to use a            place.
fully outsourced end-to-end service, there are
options at every stage in terms of either carrying
out the activity internally or sourcing from external   Stage 2
providers.                                              Having identified the potential activities that could
                                                        be sourced from third parties, the next step is to
ƒƒ Supplier registration / enablement
                                                        assess which would show the greatest benefits if
ƒƒ Supplier information, verification and master        that step were taken.
   data management
                                                        Here are the main issues to be covered in such
ƒƒ Developing and maintaining supplier and / or         analysis.
   internal catalogues
                                                        ƒƒ How strong is the current internal capability in
ƒƒ Processing requisitions and purchase orders             that activity?
ƒƒ Invoice handling and management of payables          ƒƒ Is there potential for improving capability if it is
ƒƒ Spend reporting and analytics                           not currently meeting needs?
Within the strategic sourcing cycle, we have            ƒƒ How well-developed and capable is the market
the obvious option of outsourcing the entire               for external provision of that service?
responsibility for some or all categories. But there    ƒƒ Are there clear benefits (direct cost saving or
are also many potential sub-sets of the whole              clear impact on procurement performance) from
process which can be provided by third parties: for        external provision because of the provider’s
instance,                                                  capability or the effect of aggregation?
ƒƒ Market and supplier research                         ƒƒ Will we give up the chance of gaining
ƒƒ Pre-qualification process                               competitive advantage if we source externally?
ƒƒ Auction / complex sourcing processes (e.g.           ƒƒ What are the practical issues around moving to
   optimisation)                                           external provision – cost, effect on staff (TUPE
ƒƒ Elements of post-contract supplier management           etc)?
   (e.g. audits or benchmarking)                        Applying these key questions to the range of
Some activities fall under both the P2P and             potential services can help to determine where
strategic sourcing headings; Supplier Information       the maximum benefit may be available, and help
Management is one of those, which we will               to clarify the nature of those benefits, as in the
consider more fully in part 2 of this Paper. It         example below, (which shows just two potential
feeds both the transactional process, being a key       areas of external provision).
element of the supplier registration / enablement       This type of analysis can be applied in a structured
part of the cycle. But in terms of providing input      manner across the range of potential service areas
that can be considered as part of the strategic         and can help determine where the external market
sourcing cycle – for instance, risk related             may bring the most value.




                                                                                                                  6
How to balance internal and external service provision
    – key decisions for procurement professionals
    A Spend Matters White Paper sponsored by Achilles




      Outsource area                     Positives                    Negatives                Conclusion

      End-to-end category                Outsourcer has               Give up chance to        Possibly worth
      management for                     greater capability in        derive competitive       pursuing for some
      ‘tactical’ spend                   these categories             advantage from these     categories – move to
      categories                                                      categories               market testing phase
                                         Can aggregate with                                    with a view to a pilot
                                         other client volume to       Outsourcer needs
                                         get better value             managing – careful
                                                                      alignment of goals
                                         Lower operational
                                         cost (shared resource
                                         with other clients)

      Supplier Information               Better quality of            Payment to               Highly beneficial from
      Management                         information if a             outsourced provider      a cost and quality
                                         specialist is used           by buyer or suppliers    point of view; few
                                                                                               downsides. (n.b.
                                         More up-to-date,             Lack of direct control   Forrester3 report
                                         accurate broader                                      identified 41% savings
                                         range of data                                         in pre-qualification
                                                                      Resistance from
                                                                                               costs plus other
                                                                      suppliers to providing
                                                                                               benefits)
                                         Lower cost; in-house         data to third parties
                                         option can be very
                                         expensive

                                         Take advantage of
                                         better IT systems than
                                         likely to be available
                                         internally

                                         Support for suppliers
                                         completing the
                                         process

                                         3rd party validation of
                                         data adds credibility

                                         Potential for global
                                         visibility of its supplier
                                         ecosystem




7   3. The Total Economic Impact of Achilles Supplier Information
    Management Solution, Forrester Inc, August 2011
Part 2 Supplier Information                            Many organisations will hold some data on the
Management                                             top 100 or so key suppliers, and a small amount
5. What is Supplier Information Management?            of data will be held on all suppliers (at least
Supplier Information Management embraces the           enough to facilitate payment of invoices) but very
collection, evaluation and monitoring of information   rarely is information consistent, up-to-date and
on suppliers and contractors including factual         comprehensive. Moreover, supplier information
company information, risk evaluation, vendor           is often distributed in different parts of the
appraisal and performance management.                  organisation, at corporate, divisional or operational
                                                       level and, all too frequently, is housed in multiple
Supplier information management marries
                                                       systems in silos that are not always connected. Not
three sources to create a universe of supplier
                                                       to mention the different information requirements of
information.
                                                       different departments, regional locations.
ƒƒ The supplier’s view of themselves (e.g. who
                                                       Aberdeen Research4 recently suggested that
   they are, who owns them, size, capabilities and
                                                       ‘due to multiple systems, supplier information is
   qualification).
                                                       often prevented from providing a holistic picture
ƒƒ Third party or objective information about          of a supplier due to lack of a unified supplier
   supplier certifications, accreditation, financial   management process.’ The survey reported
   or other data (e.g. reports and accounts,           that 50% of respondents were found to be using
   insurances, references and other objective          between two to three systems that contain supplier
   qualification).                                     information.
ƒƒ Information from the buying organisation (e.g.      Why is it so difficult to get this right? Largely
   spend, performance, bid history).                   because gathering and managing data is a labour
                                                       intensive and time-consuming activity. Information
                                                       changes, grows or becomes out-of-date
                                                       constantly, so work needs to be continuous and
                                                       ongoing. While tools to help automate the process
                                                       have become much more useful and more widely
                                                       adopted, there is still a certain amount of laborious
                                                       work which cannot be fully automated and needs
                                                       to be carried out in order to refine and verify data.
                                                       To be positive, the good news is that there are
                                                       tools and technology available now that can
                                                       help organisations obtain and manage good
                                                       quality data to help mitigate these risks. Yet our
                                                       experience is that senior managers in most cases
                                                       assume their organisation holds more and better
                                                       data about suppliers than is actually the case. That
                                                       is true even for basic administrative details, and
                                                       even more so for complex, variable or time-related
                                                       information.




                                                       4. Aberdeen Group. The year of the supplier, perspectives on   8
                                                       supplier management in 2011. May 2011
How to balance internal and external service provision
    – key decisions for procurement professionals
    A Spend Matters White Paper sponsored by Achilles




    6. Why does Supplier Information                           ƒƒ Supply chains are longer and more fragile, and
    Management matter?                                            vulnerable to events such as natural disasters
    In a recent research report, Jason Busch of                ƒƒ Supplier financial viability, and related
    Spend Matters US5 described the challenges that               operational viability, due to weakening balance
    customers want to solve with Supplier Information             sheets, failures amongst their customers etc.
    Management.
                                                               ƒƒ Supplier quality and performance risk including
    ƒƒ How can I bring more suppliers onboard, more               traceability of components or raw materials
       quickly without increasing risk or the potential
                                                               ƒƒ Greater regulatory and legal risk e.g., the Bribery
       for non-compliance?
                                                                  Act
    ƒƒ Can I build a single platform to monitor
                                                               ƒƒ More pressure from investors and a desire for
       my supplier facing interactions just as the
                                                                  stronger corporate governance
       commercial organisation can on the sales and
       customer service side of the house?                     ƒƒ Growing “corporate social responsibility”
                                                                  agenda highlights operational and reputational
    ƒƒ How can I rapidly gain a common view into
                                                                  risk in the supply chain
       supplier information to rapidly take action
       to identify and implement cost reduction                But it isn’t just about risk management, important
       opportunities for my supply base?                       though that is. Enforcing organisational policies
                                                               and standards includes elements of risk
    ƒƒ What are the best ways of creating auditable
                                                               management as we described above. But it goes
       trails of correspondence and information
                                                               beyond that in making sure we obtain consistency
       capture with suppliers in the event that we need
                                                               and (where it is important) control including that
       to later rely on this information?
                                                               single view of supplier information and data across
    ƒƒ Are there ways that we can reduce costs                 the whole organisation.
       and errors by automating traditional vendor
                                                               Robust and accurate supplier information also
       management roles and supplier interactions?
                                                               enables and assists us to determine the best
    ƒƒ How can we systematically reduce our risk and           suppliers to meet our needs, making sure their
       exposure to the supplier financial and credit           capabilities fit the requirements of the buying
       crisis? How do we know when to take proactive           organisation. That in turn leads to commercial
       action? With what group of suppliers?                   advantage – after all, choosing the best suppliers
    Assuming that this sort of information management          is probably the single most important role of
    platform can be achieved, what does it allow the           the procurement function in terms of creating
    buyer to do? It informs the whole procurement              competitive advantage.
    cycle, from choosing the best possible suppliers,          Finally, a process for delivering good Supplier
    evaluating and managing risk, enforcing global             Information Management increases internal
    policies and standards, and enabling insightful            efficiency considerably. Aspects such as
    spend analytics. Even focusing purely on supply            minimising the time that is spent on searching for
    chain risk management, we have seen a huge                 information, checking, inputting and updating it,
    growth in the emphasis on this topic recently,             answering supplier queries, carrying out checks
    which is not surprising when we look at some of            on accreditations; all of this can be very time
    the key issues facing buyers.                              consuming, and therefore expensive.




    5. Spend Matters Compass Series: Leveraging Supplier
9   Management Platforms for Multiple Goals: Risk Reduction,
    Supplier Diversity and CSR. 2010, Volume 4
Getting accurate and robust information, right first
time, can reduce direct costs considerably for the
organisation


7. Key elements of a Supplier Information                8. Supplier Information Management as a
Management resource                                      strong candidate for external provision
So what should we be looking for in a SIM                We’ve discussed the state of Supplier Information
solution? In the research series mentioned above,        Management in organisations and our view that in
Jason Busch also outlined the key elements that          many cases, it is not as good as it should be. So
a SIM solution should have in terms of underlying        when organisations look at utilising external service
capabilities and features6:                              provision, it may not be an “outsourcing” exercise
... all Supplier Information Management solutions        anyway – that assumes something is being done
should have the following underlying capabilities        internally already, which, as we’ve seen, is often
and component features:                                  not the case. But whether or not there is anything
                                                         internal to outsource in the first place, we can use
ƒƒ Supplier portals for basic registration and as a
                                                         the checklist in section 2 of this Paper to assess
   single location to manage a profile and related
                                                         whether SIM appears to be a strong candidate for
   information
                                                         taking advantage of external service providers.
ƒƒ Supplier self service as part of a portal             And the answer is a resounding “yes”. Why is that?
   capability, enabling suppliers to access and
                                                         ƒƒ Firstly, it is an important activity and some
   update information online themselves rather
                                                            aspects of it are essential; it feeds into both the
   than having to call a supplier management team
                                                            transactional P2P cycle and the strategic sourcing
   member at the customer organisation
                                                            or category management process. It is not an
ƒƒ Workflow and process management tools that,              optional process; it needs to be carried out and is
   at their most basic level, allow procurement             a critical dependency for many other aspects of
   teams to route requests and automate                     successful procurement.
   registration and information gathering
                                                         ƒƒ Service providers have the opportunity to leverage
   processes, manually intervening by exception
                                                            their work across multiple clients-obtaining reliable
   rather than for each item requiring attention
                                                            supplier information is time-consuming and
ƒƒ Data enrichment capability that provides                 therefore expensive, so spreading that cost makes
   additional information and validation outside of         sense. And much of what is needed is common
   just supplier-provided information, for instance         to all the potential buyers who may be interested
ƒƒ Integration into third-party systems                     in a certain supplier. So the economies of scale
ƒƒ Internal portal/dashboard views of supplier              are obvious in terms of engaging a provider who
   activity, ideally customisable, based on role,           can aggregate their clients’ requirements in the
   function etc                                             SIM field.
ƒƒ Report and visualisation capabilities that            ƒƒ Linked to this point is the geographically
   provide standard reports                                 dispersed nature of most large organisations’
                                                            supply chains. The work to gather the data
ƒƒ Additionally, state of the art Supplier Information
                                                            therefore becomes even more onerous for any
   Management should provide the flexibility for
                                                            individual organisation, as the suppliers are likely
   information to be captured to adapt to changing
                                                            to be domiciled in a wide range of countries
   requirements and according to a risk matrix
                                                            around the world.
   determined by client and sector needs
                                                         ƒƒ Obtaining, verifying and managing supplier
                                                            information is complex and requires a degree
                                                            of skill and experience. It is not merely an
                                                            administrative task that can be fully automated.
                                                            For an organisation to develop such experience
                                                            internally is therefore expensive, and the right
                                                            skills are scarce.



                                                         6. Spend Matters Compass Series. Supply risk management -
                                                         segmenting the technology and contact landscape and choosing   10
                                                         the right category of solutions. 2010, Volume 4
How to balance internal and external service provision
     – key decisions for procurement professionals
     A Spend Matters White Paper sponsored by Achilles




                                                                      provided from external sources cover everything
                                                                      from outsourcing of specific spend categories,
                                                                      partial or total P2P outsource, or key areas such
                                                                      as Supplier Information Management.
                                                                   ƒƒ External provision can bring a number of
                                                                      benefits, ranging from taking advantage of
                                                                      provider economies of scale or labour arbitrage,
                                                                      to utilisation of scarce expertise.
                                                                   ƒƒ Given this, an absolutely central role for the CPO
                                                                      is to optimise the blend of activities performed
                                                                      internally and those delivered by external
                                                                      providers, across the whole procurement eco-
                                                                      system. CPOs should be analysing activities
                                                                      in a structured manner to develop, and then
     Supplier Information Management using a collaborative model
                                                                      regularly review, their strategy for achieving this
                                                                      optimal blend of service provision.
     ƒƒ Supplier information is potentially high impact,
                                                                   ƒƒ Supplier Information Management (SIM) is
        high risk, and high value, so expertise is vital.
                                                                      an interesting - and growing – example of
        It has become clear over recent years that
                                                                      an important activity which can be sourced
        understanding the supply base is vital, not only
                                                                      from external providers, with resulting benefits
        for purely commercial reasons but as a key
                                                                      to the customer organisation. It is gaining
        element in risk management and mitigation.
                                                                      a higher profile as organisations better
        Many organisations have learnt to their cost
                                                                      understand supply chain risk issues, but also
        that unawareness of what is happening in their
                                                                      the commercial benefits that are enabled by
        supply chain is not an excuse that customers,
                                                                      supplier information.
        media or investors accept lightly.
                                                                   ƒƒ That growth trend is likely to continue; and firms
     ƒƒ While effective SIM is important, it is generally
                                                                      in the SIM field who can offer a combination
        not perceived as ‘core’ business or a
                                                                      of strong technology, customer service, and
        likely source of competitive advantage, so
                                                                      global reach are likely to thrive as more and
        outsourcing does not sacrifice such potential
                                                                      more organisations realise the critical impact
        benefits. But organisations taking advantage
                                                                      suppliers can have on their business. Knowing
        of external provision can still apply their own
                                                                      and understanding more about those suppliers
        particular intelligence and strategy to the
                                                                      will increasingly be seen as a strategic
        information obtained in order to drive such
                                                                      imperative for procurement, finance and
        advantage.
                                                                      business leadership.
     We can see from this analysis that SIM is a
                                                                   ƒƒ Supplier Information Management, on the face
     very strong candidate for using an external
                                                                      of it a simple activity, is all about creating a
     service provider, and we have seen very
                                                                      single, consolidated source of information –
     strong growth in SIM solutions and service
                                                                      enabling an organisation to collect, maintain
     providers over the last few years.
                                                                      and aggregate information from all sources
     9. Conclusions                                                   within the business. This transcends master
     ƒƒ There are many options for external service                   data management – and creates a means to
        provision to supplement activities performed                  leverage all information enabling the entire
        by the internal procurement function, and the                 enterprise to gain the necessary insight and
        range of providers available across most areas                opportunities.
        of interest is growing. Services which can be




11
About Achilles                                             About the Author - Peter Smith
As Peter Smith describes, the management of                Managing Director, Spend Matters UK/Europe
supplier information isn’t often considered a core         Peter has 25 years’ experience in procurement
activity, it’s labour intensive, repetitive and many       and supply chain as a manager, procurement
businesses don’t have the resources to devote to           director, consultant, analyst and writer. He edits
the task. This can leave organisations exposed to          Spend Matters UK/Europe, and with Jason Busch,
supplier non-compliance or unexpected failure.             the founder of Spend Matters in the US, has
Achilles offer a Supplier Information Management           developed it into a leading web-based resource
solution to provide businesses with one source             for procurement and industry professionals.
of accurate, up-to-date and validated supplier             Peter is also Managing Director of Procurement
information. The solution encompasses                      Excellence Ltd, a leading specialist consulting
everything from finding and selecting potential            firm, and is recognised as one of the UK’s leading
suppliers, through to pre-qualifying, evaluating           experts in public and private sector procurement
and monitoring performance. Each of these                  performance improvement. Peter has an MA in
is an important step towards the continuous                Mathematics from Cambridge University, is a
management of risk throughout the supply chain.            Fellow and was 2003 President of the Chartered
Thousands of buyers use Achilles every day to gain         Institute of Purchasing and Supply, and his
visibility of their suppliers, and with operations in 23   first (co-authored) book, “Buying Professional
countries and 20 years’ experience, they can do so         Services”, was published by the Economist Books
with confidence whilst unlocking tangible benefits         in June 2010*. Before moving into consultancy, he
of cost reduction, increased process efficiency and        was Procurement Director for the NatWest Group,
risk reduction.                                            the Department of Social Security (the DSS), and
                                                           the Dun & Bradstreet Corporation, and held senior
                                                           positions in the Mars Group.
                                                           Spend Matters is thankful for the support of
                                                           Achilles, our sponsor for this paper. Spend Matters
                                                           sponsors have no additional opportunity to
                                                           influence the content or research of Spend Matters
                                                           material or products relative to other software or
                                                           services providers.
                                                           Further information on this topic and others can be
                                                           found at the website www.spendmatters.co.uk, or
                                                           we can be contacted at psmith@spendmatters.
                                                           com. Reproduction of this publication in any form
                                                           without prior written permission is forbidden.
                                                           *Buying Professional Services (Czerniawska and
                                                           Smith, Economist Books, 2010).




      Achilles Group Limited
      30 Park Gate, Milton Park, Abingdon, Oxon, OX14 4SH, UK
      T: +44 (0)1235 820813 F: +44 (0)1235 8211093 E: marketing@achilles.com W: www.achilles.com
      001-02/2012
      Printed on ‘Evolution’ Satin which is 75% recycled and uses ECF pulp

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Balancing internal and external service provision for procurement professionals

  • 1. key decisions for procurement professionals How to balance internal and external service provision Peter Smith Managing Editor Spend Matters UK/Europe February 2012 services for professional procurement www.achilles.com
  • 2. Balancing internal and external service provision – key decisions for procurement professionals A Spend Matters White Paper sponsored by Achilles Executive summary Spend Matters observes trends in procurement carefully, and there is no doubt that the pace of change facing senior management is increasing given globalisation, supply chain risks and challenges, and the pressures on organisations to perform. This paper contains important messages, bringing together our thinking in two key areas with important implications for senior procurement practitioners. 1. One of THE most important roles for 2. Supplier Information Management is a powerful Procurement Leaders (CPOs and similar) today example of a capability that can be provided is to optimise the use of resources from both effectively from outside the organisation, yet inside and outside the organisation, blending contribute greatly to successful delivery of them successfully to achieve their goals. procurement objectives for the in-house team. 2
  • 3. How to balance internal and external service provision – key decisions for procurement professionals A Spend Matters White Paper sponsored by Achilles In the first section of the paper, we explain: ‘candidate’ for external service provision, with ƒƒ How and why procurement executives need to significant benefits available to organisations become adept at using third parties to deliver who follow this route. some of the tasks necessary for the function’s Part 1 Balancing internal and external success. procurement delivery ƒƒ The various reasons and justifications for using 1. Introduction third parties, such as economies of scale, If we go back 30 years or so, to the beginning of expertise and leverage. the author’s business career, virtually everything ƒƒ How CPOs can evaluate and prioritise the use of that was done by a procurement function or third parties for procurement services provision department was carried out by the internal staff to steer them towards the right ‘blended’ employed by the organisation. There was little solution. in the way of computerisation; management While large-scale end-to-end outsourcing of consultants were still a fairly exotic breed; and while procurement has not spread in the way many there were other professional service providers in analysts predicted ten years ago, there are, certain business areas already well established nevertheless, many opportunities for organisations (such as consumer market research firms), there to engage third party providers to supply elements was little of that nature in the procurement space. of the overall procurement process – it doesn’t But gradually this has changed. There are now a have to be all or nothing. There has been a visible wide range of providers all positioned to assist the growth in the number of organisations using procurement executive achieve his or her aims. external providers for certain spend categories; However, in recent years, some commentators or elements of their more transactional P2P have suffered from over-excitement about processing work; or indeed valuable specialist trends, and proclaimed that full procurement elements of the overall process such as Supplier outsourcing was ‘about to take off’. The reasons Information Management, which is discussed here given by analysts for this statement have always later. The opportunity to integrate internal and seemed convincing; economies of scale, allowing external service provision is considerable and is organisations to focus on core business, and likely to lead to significant benefits compared to a others. But stubbornly, year after year, the service delivered purely with internal resources. procurement ‘business process outsourcing’ In our second section, we look in more detail (BPO) market grows very slowly. As AT Kearney at Supplier Information Management (SIM), an said in their ‘Procurement Outsourcing1’ note, umbrella term embracing the collection, evaluation “Despite a substantial growth in outsourcing in the and monitoring of all information on suppliers past several years, procurement outsourcing is and contractors including risk evaluation, vendor less than two percent of all outsourcing activities”. appraisal and performance management. That’s not to say that firms ranging from Infosys to We explain; Xchanging, IBM to ICG Commerce haven’t made some progress and picked up some good clients ƒƒ Why SIM is increasingly important to along the way. But the market certainly hasn’t organisations, given the need to manage developed in the way that, for instance, IT or Payroll suppliers more professionally and mitigate the services outsourcing have done. ever-increasing volume and scale of risks in global supply chains; However, it is our hypothesis that procurement has actually taken a more subtle route to greater ƒƒ The role of SIM in both the transactional and utilisation of third party service providers to strategic sourcing cycles; and support its own activities. Leading procurement ƒƒ Why SIM is often a strong and positive practitioners are taking much more advantage 3 1. http://www.atkearney.com//index.php/Publications/ procurement-outsourcing.html
  • 4. of external service provision than a decade ago; Leverage expertise, address shortage of but it has not been the full outsource route that internal skills has generally been chosen. Rather, they have Organisations may suffer from a lack of particular looked carefully at which elements of the overall expertise in certain areas, whether that means procurement process and set of responsibilities specific spend categories or other areas; perhaps make most sense to acquire externally, rather than technical skills relating to technology, or skills in deliver internally. finance, and market analysis etc. It may be that One reason for this may be the understandable the issue is driven by local skill shortages; or more reluctance of procurement professionals to hand often it is not economic for an organisation to pay over their entire commercial sovereignty to an what is needed to get true experts in all the internal external provider, with the perceived danger of roles. losing control of strategic supplier relationships. However, they see no such threat in buying Reduce internal costs (labour arbitrage) external information or tools to support elements If this last example is about getting more capability of their overall activity and process, where external for the same price, in this case we are looking provision can add value without major risk. at finding cheaper resource to deliver perhaps a similar level of performance. Offshoring to 2. Why use third parties? lower-cost countries is the classic example here; Let’s go back a step and look at why organisations originally we saw this in what were perceived as might use an external service provider for some of activities of a lower added value nature, such as their procurement activity, rather than delivering it P2P processing, catalogue management. But internally. These are the key drivers that tend to be increasingly this may include more skilled work used in justifications and business cases for taking including sourcing or technology development. that step. Leverage volume / collaborate Approaching the market with a greater volume of spend will, all other things being equal, enable better value to be obtained. So transferring responsibility for the actual procurement of certain spend categories to a provider who can aggregate volume from a number of clients – and perhaps include their own internal spend in the total – may enable all those customers to benefit from better results than they could obtain as individuals. But this driver is not merely about leveraging spending for lower prices. As well as outsourcing actual direct ‘buying’, there are other activities, as we will see later, that it may be uneconomic for an organisation to perform individually, but become affordable when executed in collaboration with others. 4
  • 5. How to balance internal and external service provision – key decisions for procurement professionals A Spend Matters White Paper sponsored by Achilles Sort out broken processes or outsourcing all indirect spend categories. But Perhaps a less common driver for outsourcing is at the less dramatic end of the range, we can as a response to ‘broken processes’ internally. consider external provision of much smaller While most experts will advise organisations to fix elements of the overall procurement task. processes before outsourcing, and this is good This is not generally termed “outsourcing”, theoretical advice, in some cases the organisation although it shares some of the same may simply not have the time, ability or resource to characteristics. And it is not about transferring core do this. In such cases, the outsourcing may enable responsibility out of the organisation; it is about benefits to be gained through the provider’s ability gaining additional expertise and resource from to do the work better and pass on some of the outside to support the key functional activities. benefits. The bottom line, according to Horses for The type of activities and responsibilities that Sources2, is that organisations, tend to outsource organisations might look to obtain from external processes that probably aren’t very well run in the providers are described in the next section. But first place. their range, importance and the opportunity they provide for improving procurement performance is Focus on core business very significant; a fact that many organisations and Organisations may decide that certain activities leaders have not, in our opinion, fully appreciated. are distractions to their ‘core business’. While this As a consequence, we’ve come to this view. is often linked to the lack of skills described above, it may be independent to that and be a judgement One of the most important roles for Procurement that passing responsibility to an external body will Leaders (CPOs and similar) today is to source, free up management time and focus to concentrate manage, combine and blend capabilities and on whatever is defined as “core”. resources successfully, from inside and outside the organisation, to achieve their goals. 3. The growth of procurement service providers 4. Prioritising the options for third-party The typical procurement function in a large provision organisation will almost certainly have many more So if this is a key role, how should a procurement activities performed by third parties than there were executive determine what can most productively ten years ago. There will be technology platforms be delivered by third parties? We recommend a in use, probably with external support or consulting structured analysis of the range of options available around their use and every chance there will be across the whole procurement landscape; but in some consultancy involvement somewhere around our experience, very few organisations carry out the function; research, benchmarking, networking this sort of consideration. Decisions are made or information service providers will feature. on an ad hoc basis, or those driven by a crisis or There are now many options and opportunities perceived crisis in a particular area. It is clearly within the overall procurement process to consider better not to wait until events dictate hasty action, third-party delivery of services that contribute to so we recommend strongly a pro-active approach overall procurement effectiveness. At one extreme to evaluating the options and structuring the best there is full BPO type outsourcing; perhaps mix of provision. moving all P2P activities to an external provider; 5 2. Horses for Sources. The undisputed facts about outsourcing. May 2011
  • 6. Stage 1 The first step is to identify work currently information, or data that may form part of the undertaken and develop a map of the processes qualification and supplier selection process – it is and activities undertaken by the procurement also an intrinsic part of that process. (and related) functions. This does not need to be Similar analysis might cover support areas within broken down into every detailed step, but should procurement, or the human resources aspects; be considered at a level that relates to how the do we want to manage recruitment and training market might offer to provide such services. internally or use external experts for instance. But For example, consider the P2P (purchase to the key is to identify a range of options in the first pay) process. As well as the option to use a place. fully outsourced end-to-end service, there are options at every stage in terms of either carrying out the activity internally or sourcing from external Stage 2 providers. Having identified the potential activities that could be sourced from third parties, the next step is to ƒƒ Supplier registration / enablement assess which would show the greatest benefits if ƒƒ Supplier information, verification and master that step were taken. data management Here are the main issues to be covered in such ƒƒ Developing and maintaining supplier and / or analysis. internal catalogues ƒƒ How strong is the current internal capability in ƒƒ Processing requisitions and purchase orders that activity? ƒƒ Invoice handling and management of payables ƒƒ Is there potential for improving capability if it is ƒƒ Spend reporting and analytics not currently meeting needs? Within the strategic sourcing cycle, we have ƒƒ How well-developed and capable is the market the obvious option of outsourcing the entire for external provision of that service? responsibility for some or all categories. But there ƒƒ Are there clear benefits (direct cost saving or are also many potential sub-sets of the whole clear impact on procurement performance) from process which can be provided by third parties: for external provision because of the provider’s instance, capability or the effect of aggregation? ƒƒ Market and supplier research ƒƒ Will we give up the chance of gaining ƒƒ Pre-qualification process competitive advantage if we source externally? ƒƒ Auction / complex sourcing processes (e.g. ƒƒ What are the practical issues around moving to optimisation) external provision – cost, effect on staff (TUPE ƒƒ Elements of post-contract supplier management etc)? (e.g. audits or benchmarking) Applying these key questions to the range of Some activities fall under both the P2P and potential services can help to determine where strategic sourcing headings; Supplier Information the maximum benefit may be available, and help Management is one of those, which we will to clarify the nature of those benefits, as in the consider more fully in part 2 of this Paper. It example below, (which shows just two potential feeds both the transactional process, being a key areas of external provision). element of the supplier registration / enablement This type of analysis can be applied in a structured part of the cycle. But in terms of providing input manner across the range of potential service areas that can be considered as part of the strategic and can help determine where the external market sourcing cycle – for instance, risk related may bring the most value. 6
  • 7. How to balance internal and external service provision – key decisions for procurement professionals A Spend Matters White Paper sponsored by Achilles Outsource area Positives Negatives Conclusion End-to-end category Outsourcer has Give up chance to Possibly worth management for greater capability in derive competitive pursuing for some ‘tactical’ spend these categories advantage from these categories – move to categories categories market testing phase Can aggregate with with a view to a pilot other client volume to Outsourcer needs get better value managing – careful alignment of goals Lower operational cost (shared resource with other clients) Supplier Information Better quality of Payment to Highly beneficial from Management information if a outsourced provider a cost and quality specialist is used by buyer or suppliers point of view; few downsides. (n.b. More up-to-date, Lack of direct control Forrester3 report accurate broader identified 41% savings range of data in pre-qualification Resistance from costs plus other suppliers to providing benefits) Lower cost; in-house data to third parties option can be very expensive Take advantage of better IT systems than likely to be available internally Support for suppliers completing the process 3rd party validation of data adds credibility Potential for global visibility of its supplier ecosystem 7 3. The Total Economic Impact of Achilles Supplier Information Management Solution, Forrester Inc, August 2011
  • 8. Part 2 Supplier Information Many organisations will hold some data on the Management top 100 or so key suppliers, and a small amount 5. What is Supplier Information Management? of data will be held on all suppliers (at least Supplier Information Management embraces the enough to facilitate payment of invoices) but very collection, evaluation and monitoring of information rarely is information consistent, up-to-date and on suppliers and contractors including factual comprehensive. Moreover, supplier information company information, risk evaluation, vendor is often distributed in different parts of the appraisal and performance management. organisation, at corporate, divisional or operational level and, all too frequently, is housed in multiple Supplier information management marries systems in silos that are not always connected. Not three sources to create a universe of supplier to mention the different information requirements of information. different departments, regional locations. ƒƒ The supplier’s view of themselves (e.g. who Aberdeen Research4 recently suggested that they are, who owns them, size, capabilities and ‘due to multiple systems, supplier information is qualification). often prevented from providing a holistic picture ƒƒ Third party or objective information about of a supplier due to lack of a unified supplier supplier certifications, accreditation, financial management process.’ The survey reported or other data (e.g. reports and accounts, that 50% of respondents were found to be using insurances, references and other objective between two to three systems that contain supplier qualification). information. ƒƒ Information from the buying organisation (e.g. Why is it so difficult to get this right? Largely spend, performance, bid history). because gathering and managing data is a labour intensive and time-consuming activity. Information changes, grows or becomes out-of-date constantly, so work needs to be continuous and ongoing. While tools to help automate the process have become much more useful and more widely adopted, there is still a certain amount of laborious work which cannot be fully automated and needs to be carried out in order to refine and verify data. To be positive, the good news is that there are tools and technology available now that can help organisations obtain and manage good quality data to help mitigate these risks. Yet our experience is that senior managers in most cases assume their organisation holds more and better data about suppliers than is actually the case. That is true even for basic administrative details, and even more so for complex, variable or time-related information. 4. Aberdeen Group. The year of the supplier, perspectives on 8 supplier management in 2011. May 2011
  • 9. How to balance internal and external service provision – key decisions for procurement professionals A Spend Matters White Paper sponsored by Achilles 6. Why does Supplier Information ƒƒ Supply chains are longer and more fragile, and Management matter? vulnerable to events such as natural disasters In a recent research report, Jason Busch of ƒƒ Supplier financial viability, and related Spend Matters US5 described the challenges that operational viability, due to weakening balance customers want to solve with Supplier Information sheets, failures amongst their customers etc. Management. ƒƒ Supplier quality and performance risk including ƒƒ How can I bring more suppliers onboard, more traceability of components or raw materials quickly without increasing risk or the potential ƒƒ Greater regulatory and legal risk e.g., the Bribery for non-compliance? Act ƒƒ Can I build a single platform to monitor ƒƒ More pressure from investors and a desire for my supplier facing interactions just as the stronger corporate governance commercial organisation can on the sales and customer service side of the house? ƒƒ Growing “corporate social responsibility” agenda highlights operational and reputational ƒƒ How can I rapidly gain a common view into risk in the supply chain supplier information to rapidly take action to identify and implement cost reduction But it isn’t just about risk management, important opportunities for my supply base? though that is. Enforcing organisational policies and standards includes elements of risk ƒƒ What are the best ways of creating auditable management as we described above. But it goes trails of correspondence and information beyond that in making sure we obtain consistency capture with suppliers in the event that we need and (where it is important) control including that to later rely on this information? single view of supplier information and data across ƒƒ Are there ways that we can reduce costs the whole organisation. and errors by automating traditional vendor Robust and accurate supplier information also management roles and supplier interactions? enables and assists us to determine the best ƒƒ How can we systematically reduce our risk and suppliers to meet our needs, making sure their exposure to the supplier financial and credit capabilities fit the requirements of the buying crisis? How do we know when to take proactive organisation. That in turn leads to commercial action? With what group of suppliers? advantage – after all, choosing the best suppliers Assuming that this sort of information management is probably the single most important role of platform can be achieved, what does it allow the the procurement function in terms of creating buyer to do? It informs the whole procurement competitive advantage. cycle, from choosing the best possible suppliers, Finally, a process for delivering good Supplier evaluating and managing risk, enforcing global Information Management increases internal policies and standards, and enabling insightful efficiency considerably. Aspects such as spend analytics. Even focusing purely on supply minimising the time that is spent on searching for chain risk management, we have seen a huge information, checking, inputting and updating it, growth in the emphasis on this topic recently, answering supplier queries, carrying out checks which is not surprising when we look at some of on accreditations; all of this can be very time the key issues facing buyers. consuming, and therefore expensive. 5. Spend Matters Compass Series: Leveraging Supplier 9 Management Platforms for Multiple Goals: Risk Reduction, Supplier Diversity and CSR. 2010, Volume 4
  • 10. Getting accurate and robust information, right first time, can reduce direct costs considerably for the organisation 7. Key elements of a Supplier Information 8. Supplier Information Management as a Management resource strong candidate for external provision So what should we be looking for in a SIM We’ve discussed the state of Supplier Information solution? In the research series mentioned above, Management in organisations and our view that in Jason Busch also outlined the key elements that many cases, it is not as good as it should be. So a SIM solution should have in terms of underlying when organisations look at utilising external service capabilities and features6: provision, it may not be an “outsourcing” exercise ... all Supplier Information Management solutions anyway – that assumes something is being done should have the following underlying capabilities internally already, which, as we’ve seen, is often and component features: not the case. But whether or not there is anything internal to outsource in the first place, we can use ƒƒ Supplier portals for basic registration and as a the checklist in section 2 of this Paper to assess single location to manage a profile and related whether SIM appears to be a strong candidate for information taking advantage of external service providers. ƒƒ Supplier self service as part of a portal And the answer is a resounding “yes”. Why is that? capability, enabling suppliers to access and ƒƒ Firstly, it is an important activity and some update information online themselves rather aspects of it are essential; it feeds into both the than having to call a supplier management team transactional P2P cycle and the strategic sourcing member at the customer organisation or category management process. It is not an ƒƒ Workflow and process management tools that, optional process; it needs to be carried out and is at their most basic level, allow procurement a critical dependency for many other aspects of teams to route requests and automate successful procurement. registration and information gathering ƒƒ Service providers have the opportunity to leverage processes, manually intervening by exception their work across multiple clients-obtaining reliable rather than for each item requiring attention supplier information is time-consuming and ƒƒ Data enrichment capability that provides therefore expensive, so spreading that cost makes additional information and validation outside of sense. And much of what is needed is common just supplier-provided information, for instance to all the potential buyers who may be interested ƒƒ Integration into third-party systems in a certain supplier. So the economies of scale ƒƒ Internal portal/dashboard views of supplier are obvious in terms of engaging a provider who activity, ideally customisable, based on role, can aggregate their clients’ requirements in the function etc SIM field. ƒƒ Report and visualisation capabilities that ƒƒ Linked to this point is the geographically provide standard reports dispersed nature of most large organisations’ supply chains. The work to gather the data ƒƒ Additionally, state of the art Supplier Information therefore becomes even more onerous for any Management should provide the flexibility for individual organisation, as the suppliers are likely information to be captured to adapt to changing to be domiciled in a wide range of countries requirements and according to a risk matrix around the world. determined by client and sector needs ƒƒ Obtaining, verifying and managing supplier information is complex and requires a degree of skill and experience. It is not merely an administrative task that can be fully automated. For an organisation to develop such experience internally is therefore expensive, and the right skills are scarce. 6. Spend Matters Compass Series. Supply risk management - segmenting the technology and contact landscape and choosing 10 the right category of solutions. 2010, Volume 4
  • 11. How to balance internal and external service provision – key decisions for procurement professionals A Spend Matters White Paper sponsored by Achilles provided from external sources cover everything from outsourcing of specific spend categories, partial or total P2P outsource, or key areas such as Supplier Information Management. ƒƒ External provision can bring a number of benefits, ranging from taking advantage of provider economies of scale or labour arbitrage, to utilisation of scarce expertise. ƒƒ Given this, an absolutely central role for the CPO is to optimise the blend of activities performed internally and those delivered by external providers, across the whole procurement eco- system. CPOs should be analysing activities in a structured manner to develop, and then Supplier Information Management using a collaborative model regularly review, their strategy for achieving this optimal blend of service provision. ƒƒ Supplier information is potentially high impact, ƒƒ Supplier Information Management (SIM) is high risk, and high value, so expertise is vital. an interesting - and growing – example of It has become clear over recent years that an important activity which can be sourced understanding the supply base is vital, not only from external providers, with resulting benefits for purely commercial reasons but as a key to the customer organisation. It is gaining element in risk management and mitigation. a higher profile as organisations better Many organisations have learnt to their cost understand supply chain risk issues, but also that unawareness of what is happening in their the commercial benefits that are enabled by supply chain is not an excuse that customers, supplier information. media or investors accept lightly. ƒƒ That growth trend is likely to continue; and firms ƒƒ While effective SIM is important, it is generally in the SIM field who can offer a combination not perceived as ‘core’ business or a of strong technology, customer service, and likely source of competitive advantage, so global reach are likely to thrive as more and outsourcing does not sacrifice such potential more organisations realise the critical impact benefits. But organisations taking advantage suppliers can have on their business. Knowing of external provision can still apply their own and understanding more about those suppliers particular intelligence and strategy to the will increasingly be seen as a strategic information obtained in order to drive such imperative for procurement, finance and advantage. business leadership. We can see from this analysis that SIM is a ƒƒ Supplier Information Management, on the face very strong candidate for using an external of it a simple activity, is all about creating a service provider, and we have seen very single, consolidated source of information – strong growth in SIM solutions and service enabling an organisation to collect, maintain providers over the last few years. and aggregate information from all sources 9. Conclusions within the business. This transcends master ƒƒ There are many options for external service data management – and creates a means to provision to supplement activities performed leverage all information enabling the entire by the internal procurement function, and the enterprise to gain the necessary insight and range of providers available across most areas opportunities. of interest is growing. Services which can be 11
  • 12. About Achilles About the Author - Peter Smith As Peter Smith describes, the management of Managing Director, Spend Matters UK/Europe supplier information isn’t often considered a core Peter has 25 years’ experience in procurement activity, it’s labour intensive, repetitive and many and supply chain as a manager, procurement businesses don’t have the resources to devote to director, consultant, analyst and writer. He edits the task. This can leave organisations exposed to Spend Matters UK/Europe, and with Jason Busch, supplier non-compliance or unexpected failure. the founder of Spend Matters in the US, has Achilles offer a Supplier Information Management developed it into a leading web-based resource solution to provide businesses with one source for procurement and industry professionals. of accurate, up-to-date and validated supplier Peter is also Managing Director of Procurement information. The solution encompasses Excellence Ltd, a leading specialist consulting everything from finding and selecting potential firm, and is recognised as one of the UK’s leading suppliers, through to pre-qualifying, evaluating experts in public and private sector procurement and monitoring performance. Each of these performance improvement. Peter has an MA in is an important step towards the continuous Mathematics from Cambridge University, is a management of risk throughout the supply chain. Fellow and was 2003 President of the Chartered Thousands of buyers use Achilles every day to gain Institute of Purchasing and Supply, and his visibility of their suppliers, and with operations in 23 first (co-authored) book, “Buying Professional countries and 20 years’ experience, they can do so Services”, was published by the Economist Books with confidence whilst unlocking tangible benefits in June 2010*. Before moving into consultancy, he of cost reduction, increased process efficiency and was Procurement Director for the NatWest Group, risk reduction. the Department of Social Security (the DSS), and the Dun & Bradstreet Corporation, and held senior positions in the Mars Group. Spend Matters is thankful for the support of Achilles, our sponsor for this paper. Spend Matters sponsors have no additional opportunity to influence the content or research of Spend Matters material or products relative to other software or services providers. Further information on this topic and others can be found at the website www.spendmatters.co.uk, or we can be contacted at psmith@spendmatters. com. Reproduction of this publication in any form without prior written permission is forbidden. *Buying Professional Services (Czerniawska and Smith, Economist Books, 2010). Achilles Group Limited 30 Park Gate, Milton Park, Abingdon, Oxon, OX14 4SH, UK T: +44 (0)1235 820813 F: +44 (0)1235 8211093 E: marketing@achilles.com W: www.achilles.com 001-02/2012 Printed on ‘Evolution’ Satin which is 75% recycled and uses ECF pulp