Much like people, organizations can feel like a fish out of water. This typically happens when employees take on tasks they cannot complete successfully or efficiently. Such situations lead to the rise of Business Process Outsourcing (BPO).
BPO initially started in larger organizations where third-party contractors were hired to complete tasks or processes that were not part of the organization's core business. As business evolved, BPO developed into the outsourcing of large-scale operations and at times entire departments. This activity was typically a quick, reactive measure with a single focus of cost cutting.Most organizations are no longer looking to offload departments to gain quick savings. Rather, they prefer to find a partner they can work with to address their specific needs and sustain their business, while empowering employees to focus on their strengths.
Creating sustainable processes within Procurement itself has also become a larger focus for organizations. Whether it involves developing RFPs for suppliers or managing thousands of contracts, the key is that the decision to obtain sustainment services must be strategic, not reactive.
How does your organization know when to consider Sustainment services?
- Missing Technology – If employees spend more time organizing and developing sourcing event templates than they do actually understanding the market, establishing clear business needs, thinking about the best-fit sourcing strategy for the category, analyzing pricing, and planning effective negotiations, your organization does not have the proper tools to source strategically.
- Opportunity Cost of Minimal Resources – When budgets are slashed and significant tactical resources are lost, senior level staff can be left with having to conduct more tactical work. This does not utilize the people in your organization to their greatest ability and will cause retention and performance issues.
- Knowledge Gap on Team – Talent is tight in the market and if you are unable to find the right people on your team to complete certain strategic sourcing tasks, those tasks will not be done properly or effectively.
If your organization is experiencing any of the above issues, it is time to utilize Sustainment services. How would an organization receive the most value with these services and prepare for the transition effectively?
- Assess your Organization’s Needs and Strengths – What do you want to spend your time doing? What do you want your team to spend their time doing? Review the people in your organization and understand what tasks and activities would not be the best use of their talents. If one need in particular stands out, analyze the most effective way to meet it. Is it time to hire and train or look to the market for experts?
- Select a Strategic Partner – Carefully review and analyze the options available to your company. As you are making a strategic decision on how to sustain your business and deliver value to the company, you want to find experts that can hit the ground running. Once trust has been established, you may even allow that partner to do what they do best and run the show.
- Create a Vision – While it is an important factor, your vision for sustainment should not be solely focused on cutting costs. How else will those cost savings impact the business? What will the organization do with the additional funds? Will it go towards strategy, technology, recruiting?
- Manage the Transition – You may no longer have to do the work you will be hiring sustainment services to complete, but the transition itself should be considered a project to be managed efficiently, just like any other project. Highlighting risks, KPIs, change management strategies, etc. will make for a smoother experience.
- Gain Leadership Support – Like any other project, gaining the backing of company leadership is essential for adoption.
One example of Sustainment services within Procurement is Sourcing. If your organization is lacking effective and strategic sourcing, (Please see previous blog "How to Turn Your Sourcing Daydream into Reality” to learn how to conduct strategic sourcing properly if you are choosing to keep it in-house) here are some ways that Nitor would handle these services and provide value to your organization:
- Segmentation of categories - Categories should be handled differently within the organization. Segmenting categories by spend, risk, complexity, impact to the business and stakeholder dynamic are just a few ways to look at how to approach category management.
- Spend Review - Robust assessment of spend looking for “fingerprints” or indicators of opportunities within categories - multiple suppliers, inconsistent pricing, market changes, lack of compliance management, no contracts, and fragmentation of like categories.
- Project Portfolio - Develop a road map of projects to drive sustainable savings grouped by approach - full sourcing projects, sourcing events, direct negotiations, process changes, demand management, supplier relationship, etc.
- Allocate Resources - Assess how to get best value from internal and external resources and execute.
- Levels of Sustainment - Nitor offers multiple levels to their sustainment services, everything across the spectrum from organizations that know exactly how to build a robust sourcing project and just need access to the technology and management of the event, all the way to an organization that does not yet have the people or skills/experience and therefore need all aspects of strategic sourcing to be conducted. All organizations can find value through Sustainment services.
Sustainment allows for a new era of hiring outside your organization to complete sustainment tasks. With a well thought through plan and more focused lens on how to maximize value through outsourced services, organizations can sustain their business through trusted partners rather than outsource entire departments or functions.