The Sales Guy on Procurement Outsourcing
In order to get another perspective on the topic of procurement outsourcing, we reached out to our undercover sales expert, "The Sales Guy". TSG is a sales VP with 30 years and approximately $1B+ in sales under his belt. We are keeping his identity under wraps – for the same reason magicians never reveal their tricks, his colleagues might not like him giving us the inside scoop on sales’ view of procurement. Here are his thoughts...
Kelly & Team,
In my humble opinion, outsourcing occurs when management does not see appreciable value in "owning versus renting". Some companies will outsource sales by using independent reps versus direct employees. This can occur when a company wants to make all their costs variable versus fixed - when fixed costs must be slashed to survive.
If I were a procurement professional fearing extinction I would demonstrate a broader awareness and involvement in the company's overall business to management. Often execs will form assumptions about a given role that sells its value short. Other disciplines in a company such as engineering, R&D and production sometimes view procurement as a necessary evil and will find ways to circumvent them.
If procurement can make interaction with other functions less laborious and more helpful the reputation that floats up to general management will improve.
It could be as simple as reaching out to other groups and asking them how they would like to work with procurement versus the current practice. By improving relations among other company organizations and truly viewing them as procurement's customer, the group's reputation will rise and its importance will be more visible. In many ways I think procurement has to shift it's perceived role from reactive to proactive.
I do have customers using third party procurement and it is not a good experience for a sales person. There is little motivation for a third party to move quickly and negotiations are more complex and time consuming because of the distance placed between procurement and procurement's internal "customer".
The Sales Guy
My opinion on outsourcing is simple, the targets are usually those functions that are either inefficient or that don't add value. Its hard to add value when your operation isn't efficient. It;s a little like they old saying was "when you are up to you a** in alligators sometimes you forget that your goal was to drain the swamp.
My advice is people that want to avoid being a target for outsourcing is to focus on two things. One is to understand what I call cost drivers that add cost and complexity to the work procurement does and how its customers interface. Second is to use all the different tools available to improve the productivity. Productivity gives you more time to add value and more time to plan and be successful in negotiations.
If your readers would like to learn more about this I have two articles that I posted on my blog knowledgetonegotiate.blogspot.com The August 23rd post is about Cost Drivers and there is an August 24th on productivity.