In procurement discussions around the globe, the term “procurement managed services” is increasingly replacing “procurement outsourcing.” The reason, rightly so, is a simple one. While “outsourcing” suggests simply having a third party do equivalent work to what had previously been done internally, “managed services” generally involve an augmented or additional capability to business processes and systems, linked to specific outcomes that go beyond just cost savings. As enterprises continue to focus on optimizing core processes and improving agility in the digital age, this trend will only increase.
Procurement managed services include spend analytics, strategic sourcing, category management, spot buying, transactional procurement and contract administration. The terms “source-to-pay” (S2P), “source-to-contract” (S2C) and “procure-to-pay” (P2P) are commonly applied to Procurement Managed Services. The primary business objectives of procurement managed services are usually cost savings, risk management and compliance, along with reduced cycle times and an improved end-user experience.
There are a number of reasons to look at hiring a managed service provider to perform some or much of a company's procurement functions, especially in areas of indirect spend. Better market intelligence, availability of pricing and best practices data from doing many transactions across companies, strong analytics and process control capabilities, expertise on procurement tool sets, and a global delivery model are just some of the reasons why managed procurement services can be the right choice for many companies.