Procurement Services: Then vs. Now


Historically, procurement as a business function had always been about negotiating greater savings on goods and materials. Finding better sources for the same items at lower cost, then advising on contract terms and closing the best possible deal with vendors was pretty much the predominant function of procurement until the advent of modern contingent workforce strategies. Let’s look at the current state of procurement, how it arrived at its present condition, and where it is headed.

Around the late 1990s as the internet revolution began to reshape the contours of the modern global workforce, contingent workforce management emerged as a strategy, complete with an expansion of non-employee worker classifications which continues today. The proliferation of staffing suppliers delivering an expanding array of non-employee worker types – in nearly every skill category – forced procurement to focus on a new segment: services.

Services procurement represented a serious challenge to the existing processes and practices of procurement departments everywhere. Sourcing candidates to fill a dizzying array of divergent roles was far more complicated than negotiating for more commoditized goods. Luckily, the same force driving the explosion of contingent labor types – technology – also provided new tools to assist in managing procurement of a much more complex resource. Tools like VMS software for example were developed to help procurement agencies better monitor and track compliance with important legal and regulatory requirements ensuring suppliers (and supplier’s subcontractors) adhered to service levels regarding insurance requirements, background screenings, worker classifications and myriad other concerns. For procurement departments without a solid background in these disciplines, service organizations like MSPs were launched to help bridge the gap between HR and procurement, providing expertise to both groups and helping ensure cost and compliance considerations were well addressed.

However, according to a recent KPMG report, the evidence indicates that Procurement in many companies is still not operating as optimally as they could be when it comes to transitioning from the more tactical role of price watchdog to the more strategic role of business partner to the greater organization. Lots of eye-opening data in that report.

Supply & Demand Chain Executive magazine offered some insight into how to redesign Procurement departments to better address the needs of contemporary services procurement challenges. They suggest CPOs focus on five key competencies when revisiting their foundational structures. These five key competencies are:

A Consultative Attitude
Focusing on accountability with a results orientation. This attitude fosters a better ability to frame business challenges such that new/modern tools and practices can be applied to solutions.

Financial Sophistication
Financially savvy procurement personnel are prepared to build and execute sourcing and evaluation models for services procurement that incorporate solid metrics for value creation

Change Management Skills
Critical to success, solid communication skills amongst procurement professionals are necessary in helping convey complex concepts in simple terms so as to drive better adoption throughout the organization. In order for Procurement to grow into that partnership role, they must be able to convey the benefits of their services procurement strategies.

Technological Prowess
Procurement pros must stay ahead of the rapid changes in technology serving workforce management and understand how the latest technologies are driving the business. They must also be comfortable adopting and then manipulating these new tech tools to drive greater efficiency in services procurement.

Vendor Management Abilities
From creating new relationships to managing existing ones, Procurement must be deft at simplifying the complexities of these relationships and drawing the best performance from supplier/partners in an increasingly networked and collaborative environment.

It is clear that this is not your father’s Procurement function. There has been significant change and improvement in how Procurement interacts with clients both internally and externally in th past two decades. However, there is still much to be done as noted in the KPMG report. For more information on helping your procurement team reach new heights, contact nextSource today.

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