Four Ways to Improve Your Procurement Outsourcing Relationship

Nearly everyone in procurement has a story with a stakeholder that impacts their career. My particular interaction happened when I was working for a large, global beauty brand years ago.  One day, I told my marketing stakeholder that I could significantly reduce costs on a lipstick flyer that I believed they were overspending on. Her reaction was abrupt. She felt threatened that I would ruin this utterly beautiful relationship with one of her most loyal and trusted suppliers. This supplier, she assured me, was providing the perfect glossy paper to fit her marketing purpose. Her reaction taught me the importance of listening before attempting to solve the problem. I learned that there is an art to crafting your recommendation to your stakeholders by always considering needs and constraints. I still apply this approach in my current role today, where I am helping our clients build procurement outsourcing programs that deliver value. I carefully listen to understand where the organization is struggling with its current outsourcing provider or grappling with how to build the business case for procurement outsourcing.

Four Tips for Managing Doubts of Procurement Outsourcing Success

Finding the right provider for procurement outsourcing is a huge undertaking. There is a lot on the line if you select the wrong provider. Most organizations fail if they partner with a hands-off provider who pushes a “black and white” solution that isn’t specifically designed for the business’ unique ecosystem and goals. That’s what inspired me to write about some lessons learned to overcome typical constraints and doubts of procurement outsourcing. 

#1: Adopt the mantra, “procurement outsourcing is not all or nothing.”

This misbelief is a common reason why procurement executives rarely ask for help. There are several ways you can engage a third-party provider to support your goals. To begin with, ask yourself, “Do we have a capacity or a capability issue?” If you have a capacity issue, then you should engage a provider that can become an extension of your direct team. In this case, you can follow a traditional business process management (BPM) model where a provider helps fill resource gaps, support process execution, deploy new technologies like AI to reduce manual work, or build a digital roadmap for your transformation efforts. Your capacity issue might also be the result of a sub-optimal structure of your team, in which case you might need a provider who can support by designing and integrating the right operating model to ensure you make optimum use of your resources. Consider coaching or upskilling support through an academy or workshop specific to your organizational gaps and needs if you have a capability gap.  If you are unsure where to start, the procurement outsourcing provider could perform a maturity assessment and share recommendations on priorities and quick wins. 

#2: Request a co-creation approach.

Using a co-creation approach, you can design a customized solution to meet your specific business needs. According to our research, a co-creation approach improves Total Business Alignment, a key trait of high-performing teams connected to a mindset that emphasizes tight alignment with business objectives. By developing a clear governance structure, you can co-develop guidelines for the required outcomes. The collaborative communication process between you and your provider will ensure you realize the benefits of procurement outsourcing on a long-term basis and establish a true partnership with your provider. Thoughtful and transparent communication is essential to prove the cultural fit.  

#3: Involve your business stakeholders.

When you include your stakeholders early on, you ensure their business targets are considered in your work. In fact, by including your stakeholders upfront and taking time to understand their true needs – you can apply Design Thinking best practices when discussing possibilities together. Design Thinking is a topic I am passionate about because I’ve personally experienced the impact of applying empathy, active listening, and ecosystem considerations into your solution creation processes. 

During this time, your procurement outsourcing provider should learn all about your business targets before embarking on any solution crafting. This way, you are aligned on what is expected by the business upfront. You will not regret the extra time spent dedicated to aligning your vision, stakeholders partnering, talent allocation, operating model, and performance reporting.


#4: Overcome the fear of “giving away” your work.

Often, I hear procurement executives say that they worry about the ramifications of losing control. They worry about working with “outsiders” who do not fully understand the business. In many cases, the working days of your Procurement team are filled with tactical work. To bring your procurement team closer to best-in-class, you must provide them with more time to focus on strategic activities, such as category management, strategic sourcing, supplier relationships, and partnerships. Well-qualified procurement professionals do not need to be involved with transactional activities, which distract them from focusing on their profession's most impactful work. So, I always tell people, “You are outsourcing the work, not your highly skilled people.” Your top talent should shift their attention to the high value, strategic work that moves the business forward.  

In my experience, the best way to overcome this concern is by agreeing on transparent results and using measurable models. You can work with your procurement outsourcing provider to build commitment-based results. There is a wide range of commercial models to support outcome-based projects together. For example, we recently designed a rapid cost savings program to help our clients pivot and focus on cost savings efforts that helped support economic recovery during the global pandemic. We embraced a unique outcome-based model that delivered a guaranteed financial impact. This type of flexibility is important when designing a programmatic approach customized for specific needs and pushing fears away.

Above all, adaptability is critical to your success. That’s why a flexible and cultural fit partnership will create a successful collaboration. HFS Research recently shared that “cultural fit” will be the number one decision criteria for procurement outsourcing in the coming years. A great procurement outsourcing company will help you define the most efficient processes that build a best-in-class operating model that supports your procurement ecosystem. Your provider can execute on work areas that allow you to redesign your workflows for faster results and tackle more strategic projects. The bottom line is the most successful procurement outsourcing engagements are based on a true partnership.

In my next blog post, we will share how you can use empathy when listening and working with your stakeholders and suppliers to build trust and drive innovation. For now, if you are looking for more inspiration about overcoming constraints to achieve your goals, watch this short Procurement Pro-Tips video with Alpar Kamber.
 

About the Author

Dolores Lionetti

Vice President, Procurement Services

Dolores Lionetti is Vice President of Procurement Services with a focus on Business Development for the EMEA region at WNS-Denali. Dolores comes with more than two decades of experience across multiple roles, in leadership, operations and business development in Business Process Outsourcing, ITO with a special focus on Banking Services, Finance and Accounting, Source-to-Pay Services and technology solutions.

Dolores is passionate about working with clients, understanding their true needs, driving impactful customer relationships, co-creating solutions and achieving business outcomes together. She holds a Bachelor of Arts in International Marketing, German and French from the University of Salford, Manchester, UK. Dolores is Italian, has also lived and worked in the UK, France, Switzerland, resides in Germany and outside of work she enjoys exploring the world with her family.