Indirect Procurement Gets The Shaft

Feb. 7, 2007
Companies choose to outsource function to improve service.

In many organizations indirect procurement has been a low priority compared with direct procurement, according to Nelson-Hall, a business process outsourcing analyst firm based in Boston. As a result, some organizations are now outsourcing indirect procurement services to improve the management of these increasingly important processes (see "Outsourcing Procurement").

The major indirect procurement challenges for organizations, according to NelsonHall research, are:

  • a strong corporate requirement to reduce the cost of indirect goods and services;
  • difficulties in managing large numbers of suppliers in the absence of adequate breadth of internal category management expertise;
  • difficulties in managing large numbers of suppliers in the absence of common indirect procurement systems, processes and interfaces;
  • lack of indirect spend visibility.

"Organizations want an improved process compared to their in-house capability," says Rachael Stormonth, research director at NelsonHall and author of a recent report on indirect procurement outsourcing.

"To achieve this goal, vendors need to offer end-to-end process improvement across both sourcing and category management and purchase-to-pay processes."

Based on NelsonHall research, Stormonth suggests "outsourcing one of these processes in isolation is unlikely to deliver both the vendor management and the internal compliance required for an optimum solution."

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