Forming partnerships with external companies has become a large part of modern business, unlocking access to specialist knowledge, additional resources, and talent, as well as the ability to scale and speed up processes. As such, different departments across all types of organisations are increasingly working with third parties, with the global business process outsourcing market estimated to be worth $261.9 billion at the end of 2022.
Yet while many business functions have embraced working in partnership with third parties – such as human resources, IT services, marketing, and legal – some core functions seem reluctant to do so. Procurement is one of them. Traditionally fully covered in-house or, if being outsourced, then outsourced in its entirety, it is rare unusual to find the function being conducted collaboratively and combining the advantages offered by both in-house teams and external specialists.
So, what is it that makes procurement different, if anything? Do the requirements of the role make sharing its responsibilities more difficult? Or is it more of a mental barrier, created by the function’s historical focus on cost, which now makes it difficult for those working in the role to justify spending money on external support?
As procurement faces ever stronger headwinds – tackling the additional complexities of ESG, supply chain risk, economic uncertainty, and an increasingly complicated agenda – forming partnerships with experts in these fields would surely benefit the majority of organisations.
In this article, we look at the some of the obvious benefits gained through partnerships with external support to see if they could be applied to the evolving procurement function and, if they can, determine why there is still a reluctance to use them.
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Access to additional expertise
If there were just one reason to seek out external business support, then this would be it: Regardless of a business’s size, it is highly unlikely that staff expertise can cover all areas and subjects, across all functions. Third parties often have a pool of experts in various fields, who are experienced and trained to handle specific tasks or projects, that can offer support and insight in those areas where knowledge may be lacking.
Take, for example, information technology (IT). As digitalisation continues to be a priority for industries across the world, the field of IT has evolved rapidly and businesses can quickly fall behind. Those that work in partnership with experienced IT professionals, however, will have access to up-to-date knowledge around the latest technologies and best practices, which they can use to improve their IT infrastructure, reduce downtime, and enhance their overall digital capabilities.
In marketing we see a similar pattern, with external companies being used for their specialist expertise, additional resources, and fresh perspective, while in-house teams focus on the day-to-day execution of the marketing strategy, with a deep understanding of the brand, products, and target audience. Both teams work collaboratively, allowing their strengths to be combined, which ultimately leads to more effective and efficient marketing campaigns.
According to Efficio Principal, Edward Cox, “Procurement is no exception to complexity and specialism. No one team can cover the growing category and market landscape, the need for greater data and intelligence, increased speed to value, or understanding of evolving procurement excellence.”
“In an ideal world, we wouldn’t need to seek third-party support,” says Rupinder Cheema, Customer Experience Director, Jaguar Land Rover. “If we had the time and resources to create an in-house team that has expert knowledge across all elements of the customer experience, and the time to focus on each of these areas, we would."
“It is not, however, an ideal world. Customer experience encompasses too many different elements and continues to evolve, making it near impossible for everything to be covered by one team. Therefore, we work with well-established third parties that bring their own expertise and credibility to our work – allowing us to focus resources on the more strategic elements of our experience.”
The flexibility to scale alongside demand
As well as being able to offer access to specialist expertise, third parties can also bring a great deal of flexibility to the table. They provide scalable solutions, which can be easily adjusted, allowing organisations to quickly adapt to changing requirements. By using such services, organisations can outline effective responses to sudden fluctuations in demand and ensure that staff and customer needs continue to be met.
Additionally, as businesses across the world continue struggling to fill roles amid the global talent shortage, having access to resources that can be used as and when needed provides an immediate solution to the problem.
Not only that, but the flexibility offered by third parties could help businesses save on costs. If a company only needs a service for a short period of time, then working in partnership with an external company will likely be simpler and more value-effective than hiring an in-house team. Likewise, as the services offered can be increased and reduced as needed, businesses can easily bring costs down in the event of a downturn.
This flexibility is particularly important for functions such as HR, where requirements frequently vary. Recruitment, onboarding, training, and even staff wellbeing needs will rise and fall at various points throughout a company’s lifespan and the scalable solutions offered by third-party support can help the function to trim spending and stay flexible enough to meet demands.
Again, procurement is no stranger to rapid changes in demand triggered, for example, by business growth, M&A, or emergency cost reduction activity – or natural maturity cycles of activity through change and growth before stabilising to a more BAU state.
Simplified representation showing procurement resourcing over time
Fresh perspectives and mandate
Another way in which third-party specialists can provide significant value is by offering new perspectives, critical challenge, and the experience and mandate to help navigate across the C-Suite. They bring with them a different set of experiences and skills, possibly built addressing similar issues for other companies, that gives them a unique way of looking at the challenges currently being faced by an organisation and the ability to suggest approaches that may not have otherwise been considered.
External specialists can ask the difficult questions that internal teams might not have been aware of or may have been avoiding. They can challenge assumptions and beliefs that might hold the company back, helping to identify any blind spots and potential risks that could otherwise have gone overlooked.
They are also able to work across multiple departments and functions, bringing the respective leaders together to ensure everyone is aligned and working towards the same goal, facilitating communication and collaboration across different parts of the organisation. According to Efficio Vice President, Ian Bolger, “This ability to navigate across the C-suite can be particularly beneficial when working on complex, cross-functional projects – such as achieving compliance with changing industry regulations – where assurance that processes are being followed by all parties involved is particularly important.”
Perhaps more than any other factor, procurement can benefit from the fresh perspectives of third parties or the endorsement of partners with peer or deep sector expertise. As it continues to take on additional responsibilities and has a stronger influence on organisational strategies, experts that can look on the challenges faced with a fresh pair of eyes could prove invaluable in guiding its success.
So, what does this mean for procurement?
In looking at the benefits offered through using third-party support, it becomes quite evident that these benefits would also apply to procurement – perhaps even more so than in other areas of business that see external services provided on a regular basis.
The role carried out by procurement has shifted and grown in its complexity and value and, as such, access to additional expertise and resources – which can be used as and when they are needed – would provide invaluable support to the function. As external factors, such as supply chains, ESG commitments, and inflation, continue to present additional risks to businesses, being able to share those risks with professionals experienced in each area will provide huge benefits to an organisation.
So, what is the barrier? We can hypothesise that procurement is too focussed on cost to consider the value of third-party support … or perhaps too sceptical and defined as controllers or managers to step back and seek the mandate to lead strategically.
Whatever the barrier, procurement must reflect on the successes of other functions and create a greater openness to adopting a more collaborative approach with external experts. Chief Procurement Officers shouldn’t see external providers as a threat but instead as an untapped opportunity. If they shift their focus to look at business outcomes, rather than dwelling on the nuts and bolts of the process, they will uncover the significant value these services can provide.
“My career has been predominantly within the automotive industry which, arguably, has one of the most advanced procurement environments of any sector,” says Dr Ian Robertson, former member of the BMW Board of Management and presently serving as Senior Non-Executive board member at Dyson. “Automotive’s reliance on the delivery and quality of components and materials sourced from across the globe has meant that procurement has always been a business-critical function and, as such, has always been backed by external support."
“As the complexities around supply chains, ESG, and cost continue to develop across the world, other industries need to take note and start applying the same logic to their procurement functions. Third-party providers can help raise the profile of the function and support its transition to a more strategic role, but they also need to prove their value."
“External consultants need to be very clear on what they are going to achieve, and be able to show measurable results, if procurement teams are to take them seriously and make a conscious step towards a new way of working."
“To achieve any desired outcomes, you have to do the hard work first. Strategic teams need to anticipate and articulate challenges that other companies aren’t even thinking about – and get the answers to questions that they don’t even know are questions,” advises Dr Robertson.
Finding the right balance
As procurement continues to take on new responsibilities as a strategic, business critical function, it needs to have access to the right support both internally and externally. Procurement teams may want to consider that if 25% of their capability and capacity is not delivered through third party support, they are missing out on a chance to step change procurement impact and effectiveness. Let the sourcing experts think about sourcing for themselves for a change.
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