Prosero: Procurement Outsourcing: Co-SourcingSM
The procurement function is core to so many aspects of a business that many firms have preferred to keep it purely in-house. Now, however, the search for savings has led some firms to begin outsourcing elements of procurement. Their experiences are persuading others to follow suit, Prosero CEO Mark Montanari tells Jim Banks.
If you have a 10% return on sales, you need to sell $10m more to add $1m to your profit. Cut out $1m in costs, however, and that goes straight to the bottom line. That simple logic underlies why procurement is moving onto the CEO's radar and is driving the maturation of procurement outsourcing. Mark Montanari, CEO of procurement outsourcing provider Prosero, says, 'A CEO is rewarded on his ability to innovate and ensure effective execution. Procurement outsourcing supports both of these target areas. Innovation through leveraging supplier capabilities and execution against savings goals are just two examples.'
INNOVATION THROUGH COLLABORATION
World-class procurement organizations drive innovation through supplier relationship management. Procurement outsourcers can help companies extend their reach and tap into the experience and capabilities of their supply base. For example, Prosero worked with a client to rapidly transform many of the practices related to staffing, recruiting and temporary personnel management, creating a strong partner in this area. The effective use of people, processes and technology allows this inbound supply chain optimisation to occur.
'Collaboration inside a company (e.g. between facilities and across business units) is another often untapped source of innovation,' remarks Montanari. 'Prosero mines this resource and adds to the equation the experience of our professionals. Acting as a partner, we deliver the right mix of experience, services and technology to complement our clients' capabilities.'
Visionaries and consultants can live in the world of concepts – CEOs cannot. Innovation is not possible without effective execution, and effective execution is not possible without proper governance, clear accountabilities and solid operating discipline.
'The concepts of procurement are not new or complicated, but historical performance of departments responsible for this area has been underwhelming,' says Montanari. 'We recognise the challenges a procurement department has in delivering value and have developed a menu of services designed to overcome these challenges in a very efficient, disciplined and fit-for-purpose manner.'
Outsourcing procurement is not an all or nothing proposition. Clients choose a subset of services that define the relationship. Prosero works within this scope to deliver value across categories of spend and activities. According to Montanari, the services are often as simple as creating a toll free number and help desk to ensure the people that need to buy goods and services to run the company have a responsive and client-focused place to raise and resolve supplier issues. An outsourcer like Prosero can scale the investments in those capabilities across multiple clients.
'Most companies don't want to abdicate responsibility for the procurement function, but they will delegate portions of it,' says Montanari. 'Certain categories of spend and parts of the process will be given to a partner to manage within guidelines, so with Prosero's Procurement Co-SourcingSM we don't replace the internal procurement department, we complement it.'
PIONEERS REAP REWARDS
As services mature in response to the feedback of clients and suppliers along the value chain, interest in procurement outsourcing is growing. 'Like any developing market, the pioneers who accepted the model have paved the way and their positive experiences are encouraging others,' Montanari remarks.
Outsourcing procurement is not the answer for everyone – neither is the status quo. 'Change management is important and the value delivered must be clear to get and keep the stakeholders in the company engaged,' adds Montanari. 'As an independent entity we can take an unbiased look at where that value is within a company and cut through the politics to ensure the value is realised.'
More companies are finding that 'good enough' just isn't good enough any more – companies like Prosero are well positioned to help CEOs and procurement leaders achieve their goals.