In our quest for uniformity we are drawn to categorizing things. People, social groups and even work gets tied into neat little bundles to simplify our lives and reduce the number of things we must contend with. As is so often the case our bundling process causes us to go to the other extreme by developing gross/broad conclusions. We further substantiate our conclusions using statistics that are apt to be assembled across a varied mass of further amalgamated elements.
One area that has been pigeonholed by gross simplification is the procurement of outsourcing services. The task has been summarily combined with the purchasing function largely because it’s a task associated with that function. However under closer examination we come to realize that purchasing sourced services is complex and changing rapidly. Some of the things that challenge us in outsource service acquisition include,
- Difficulty in assessing global providers based on Western standards
- Challenges of matching service offering to intricate level of business operational details
- Necessity to spend dedicated field time in supplier region(s)
- Covering an insurmountable number of legal, socioeconomic, safety, and logistical elements and
- Developing a delivery benchmark that can achieve the goals of the sourcing solution without undue dependency on punitive measures.
The varying size of outsource service pursuits makes it impossible to craft a single procurement framework to apply it in all cases. Combine this with the ever changing shifts in buying trends; for example, single to multi-supplier changes, and the procurement specialist is not only out of their element but at a significant risk of failing. In these economic times one cannot afford to make mistakes. The larger the size and length of the engagement the higher the risks will be. Companies need to work from a position of success opportunity and not be burdened by unnecessary chances caused by a lack of prudent judgement.
Why do companies do it? Some undoubtedly underestimate the complexities and the risk associated with this strategy. While it would be easy to suggest laziness, its more apt to be a case of a lack in general understanding. The potential fallout that is highly probable will undoubtedly lay blame in the direction of the the outsource supplier when equal culpability must be given to the buyers involvement as well. This combined with other sourcing risks such as inadequate vendor relationship and project management, and over attention to labor arbitrage will likely put the service engagement in line to fail.
To alleviate risk, forward thinking companies establish specialized sourcing groups. These groups focus solely on sourcing related matters and the intricate details involved with evaluation, selection, and transitioning. In some cases they have assumed the duties of providing ongoing vendor and customer relationship management, performance/delivery/project management oversight, and contract operational arbitration. In short, the role carries out a lasting and long term involvement in the engagement and delivery of services.
So what will you choose? - the easy road or the right road? If you don’t know, seek the advice of others. Whether from the advisory community or from colleagues who have ventured the sourcing route. Given the opportunity for success or the perils of failure the road you choose will leave a lasting impact on the company and your professional career.
Until next time feel free to contribute your thoughts or send an email to me at jdurant@Int-IOM.org.
