Defining your procurement business case: an expert guide
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DEFINING YOUR PROCUREMENT BUSINESS CASE: AN EXPERT GUIDE
When it comes to outsourcing procurement, prospective buyers want to know how they can demonstrate a need for change, and how to provde the value that outsourcing can add.
Procurement teams rate themselves weakest at defining the measures of success. And yet, measuring success is still of the highest important, second only to realising Return on Investment.
Cost and time reduction metrics are easier to quantify. It is clear that the impact on quality and risk are far more difficult to evaluate.
With this uncertainty in mind, it can be hard to know which approach to take when defining your procurement business case. How do you decide what to monitor to demonstrate value to the business, and how do you create a compelling case for change?
How to define procurement: procurement meaning in business
When considering procurement meaning in business terms, we're often referring to the procurement definition as including:
- Sourcing suppliers
- Purchasing good and services
- Negotiation and bidding
- Contract management
- Business spend management
A recent Hays report shows that the perception of procurement and purchasing has improved. 54% of staff inside the organisation understand what procurement departments can offer.
Achieving a balance for procurement: cost, quality, efficiency and risk
Business engagement is key to defining what success looks like in terms of cost, quality, efficiency and risk. It’s important to ensure you have business engagement from the outset. The understanding you develop at this stage will help inform where the challenges really lie for your procurement strategy. You’ll also identify the correct balance for your business.
We consider these dimensions within our Recruitment Process Outsourcing (RPO) and Managed Service Provider (MSP) services. Around the world we see distinct variations. Different markets and sectors approach the weighting of these dimensions in unique ways.
How can getting the balance wrong affect types of procurement?
How can getting the balance wrong affect types of procurement?
Getting the balance wrong for your procurement activities often impacts the others in unforeseen ways. For example:
- Compromising risk management in favour of a better bottom line
- Reducing the time to hire without driving up the quality of the hire
A good outsourced recruitment provider will understand the right balance and work closely with you to navigate this successfully. Balancing procurement activities requires a solid internal business case from the outset.
We have seen risk overtake cost as the key driver for outsourcing. During the last 12 months this has been prevalent in the non-permanent workforce. We frequently give advice to organisations on levels of risk and how to improve metrics in this area. Learn more about mitigating risk when hiring contingent workers.
What is important and what is optional for an effective procurement plan?
Organisations that complete the business engagement phase successfully should possess a strong understanding of their needs. Organisations should now be able to detail precisely the operational model for acquiring these goods and services.
Businesses lacking talent acquisition or workforce management skills often hire suppliers for their expertise in these areas. Sharing knowledge at this stage allows suppliers to gain a detailed understanding. More so than a Request For Proposal (RFP) document or Q and A exchange would allow.
Taking this approach also provides the organisation with access to the latest thinking. Your business can pick and choose from a range of complementary approaches. This way you can make sure you have the best solution for your needs.
If this isn’t possible you can still benefit by providing suppliers with flexibility in the solution. Suppliers can propose when you ask for responses by detailing:
- What is important
- Which bits are must-have
- Things that are optional
Following these steps often leads to more innovative, future proof solutions.
Evaluating the risk of change to your procurement business plan
The final area in the business case that you need to consider is the risk of change. The risk is especially important as you move from your current arrangements to the proposed contract management service. This is another area we work on extensively with our prospective clients. We run implementation workshops, which map out the approach we recommend to migrating from the old to the new service.
These workshops consider all of the costs that the organisation will need to incur in order to feel the benefits of the new service. Supporting this process allows the business case for change to demonstrate an effective approach. This support also enables control of the key factors in realising the ROI.
Managing the risk of change is a challenge. It’s true whether you are looking at recruitment outsourcing for the first time or looking to change your existing provider. I would encourage buyers to work through plans and potential pitfalls in detail with prospective suppliers.
Alongside this I would also define the measures of success. A clear definition will help improve adoption and success rates of the proposed solution once live.
Putting procurement strategy lessons into practise
Creating engagement with your prospective suppliers is time consuming. I fully understand why not all organisations are able to invest that time in their HR services procurement processes.
I believe that a lack of engagement results in fewer suppliers engaging with so-called blind processes. The need to provide a tailored proposal dominates the needs of the buyer community. This limits access to solutions from otherwise suitable suppliers. Some suppliers may choose to focus on opportunities where an increase in engagement results in more relevant potential solutions.
When most people think of a business case for change they expect to create a document that has all the answers. The common expectation is to secure sign off for a project that they can then take out to market. This is not the case anymore.
It's no longer enough simply to state the case for change, your proposal must consider four key areas:
1. A clear reason for a procurement business plan: A clearly defined statement of need and the value this solution could add.
2. A flexible specification: A statement of your requirements and the standards to which the solution should conform.
3. Success metrics: Clear measurable metrics that are balanced based on stakeholder feedback.
4. Risk evaluation: Identification of all of the risk and impact areas, not just the benefits.
Once you have considered these key areas, your procurement business case becomes more than just an administrative document for approval. Instead, your business case is a framework for success, covering planning, decision-making, implementation and review.
Delivering a balance between time, cost savings, quality and risk isn’t an easy thing to achieve. But when you achieve balance, the difference is noticeable and most definitely worth the effort. I welcome the opportunity to discuss these points with any organisation. Whether you are interested in outsourcing for the first time, or considering a change in supplier, please get in contact.
Find more advice on procurement and supply chain management:
- The secrets of a successful sourcing partner
- Everything you need to know about procurement
- Six workplace trends set to impact 2024
AUTHOR
Jon Mannall
EMEA Managing Director, Enteprise Solutions at Hays
Jonathan is the EMEA Managing Director for Enterprise Solutions at Hays. Previous roles held at Hays included Service Delivery Director, Head of Sales for the UK and Global Head of Sales, Solutions and Innovation. He is now responsible for leading our teams across 11 countries in EMEA and evolving our approach to engaging, delivering and developing our strategic client relationships across the region.
Prior to joining Hays, and after completing his Masters in Philosophy and Management, Jon worked in the RPO and MSP sector for 10 years with a range of Financial Services, Public Sector, IT & Telecommunications, and Insurance clients in Sales and Operations Director roles.