Look beyond traditional TCO approach while outsourcing Procurement
Recently we had an interesting discussion with CPO of one of the leading retailer in Europe. Like it happens in most of the outsourcing initiative the Procurement was part of Finance & Accounts outsourcing initiative, which was a big daddy in terms of contemplating overall direction and strategy. While CPO was clear that he needs to look outsource indirect procurement only and was well aware of apparent challenges like fragmented landscape, broken processes, maverick buying and extremely low spend visibility. And this is compounded by the fact that his company has grown rapidly over last few years riding on extremely aggressive acquisitions which has resulted into procurement gasping for basic stuff like standardized processes, enterprise wide contract & compliance, adequate sourcing team etc. Clearly the potential savings opportunity was immense but he also wnated first to put in place a common and centralized structure & processes to achieve the savings. This requirement of additional investment in procurement was in direct conflict with his peer team who wants to create the business case on a reduced TCO (Total Cost of Operation) to reap immediate benefit from outsourcing.
