The Basics of Procurement Service Providers:
Procurement can be defined as the process to obtain materials, supplies, services and contracts with the highest level of qualitative services and the best total cost through open and fair competition.
The use of Procurement Service Providers is rapidly increasing due to global market conditions and the need for businesses to maintain and reduce costs without eliminating resources. Many world-class organizations have already contracted with Procurement Service Providers and estimates show that nearly half of U.S. companies are considering using Procurement Service Providers in the next five years.
What is a Procurement Service Provider?
A Procurement Service Provider, or PSP, is a third party organization or consultant which is used to supplement internal procurement departments. PSP's have their own staffing which assist in a variety of tasks for their clients. These tasks include: strategic sourcing, benchmarking, implementing best practices, supplier rationalization, supplier evaluation and negotiation.
"Enterprises utilizing PSP's have been able to improve spending coverage, reduce costs for goods and services, employ industry best practices, leverage the latest procurement technologies, and streamline source-to-pay processes - all without taking on the risks and assets required to achieve such results."
Why use a Procurement Service Provider?
At most organizations, it is very costly and difficult to maintain domain expertise in every category of spend. Using a PSP avoids the burdens of procurement infrastructure for non-strategic categories. A Procurement Service Provider can provide a rapid analysis of an organization's spend, negotiate with suppliers, manage supplier implementations and proven industry best practices. A good PSP will become an extension of the organization's existing procurement resources, in a non-obtrusive fashion.
In a recent article titled "Strategic Sourcing in the Mid-Market: The Echo Boom in Supply Management", the Aberdeen Research Group identified that Mid-Market companies have mostly fragmented or limited sourcing efforts. The report concluded that Mid-Market companies should have "Increased reliance on third-party consultants to help define strategic sourcing process and train internal employees on commodity costing models, sourcing automation tactics, and category and supply market assessments."
Additional research shows:
"...enterprises that have outsourced management of specific procurement processes and/or specific categories of spending have been able to achieve material cost reductions that average between 10% and 25%. In some cases, material cost reductions topped 30%."
How do I use a Procurement Service Provider?
Source One will be happy to meet with you to discuss how we may be of service to you. Keep in mind that you do not have to outsource your entire procurement function. We will be happy to assist you in selected spend categories. Source One can work on a contingency basis, so there will never be any up-front fees.
What is Strategic Sourcing?
Strategic Sourcing is a process by which we harness the skills of the supply industry to optimize sustainable competitive advantage for the business and its customers.
Our process aims to develop a secure and responsive supply base capable of meeting current & future business needs in terms of:
