ChatGPT & AI in
Procurement Course

Free Preview Lesson

Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

Procurement Service Provider — The Ultimate Guide of 2024

Key take-aways

  • Having a procurement service provider comes in handy to mitigate risks and help provide solutions to problems in the procurement departments and overall supply chain.
  • Depending on what you need, carefully select and determine how involved your procurement service provider should be.

The demand for a procurement service provider has increased due to the global market conditions. Additionally, the demand has increased as many buyers or firms cannot negotiate a reasonable price for products or services. With this in mind, what is the role of a procurement service provider? 

For this article, we will discuss what a procurement service provider is. We will also explore its role in procurement. Additionally, we will check the benefits it can give to organizations. 

After you finish this article, you will have a deeper understanding of what a procurement service provider is. This will allow you to know when is the best time to avail of the services that it can provide. 

    Whatis a Procurement Service Provider?

    A procurement service provider is a third-party firm or consultant which is hired to support the internal procurement departments. 

    It has its own staffing and assists its clients with a variety of tasks. These include strategic planning, supplier collaboration, implementing best practices, strategic sourcing, and negotiation. 

    Procurement service providers are effective and experienced third-party organizations that facilitate the relationship between buyers and suppliers. It works by utilizing an extensive database of dependable suppliers that have great performance records. 

      The Role of ProcurementService Providers

      We all know that it is very expensive for organizations to maintain domain expertise in every category of spend. When this happens, procurement service providers come into the mind of the organization. 

      Utilizing a procurement service provider avoids the difficulty of procurement infrastructure for non-strategic and non-core categories. Through this, it can provide a quick analysis of the organization’s spending. 

      Additionally, it implements changes, negotiates with suppliers, and utilizes proven best practices in the procurement industry. 

      If you have a good procurement service provider, it can become an extension of your existing procurement resources. 

      Employing expert procurement service providers will cost less and deliver efficient procurement services than what its procurement departments can offer.

        Its Service Offeringsand Work Process

        Procurement service providers offer their service usually to companies with major relief and emergency projects in the economic sector. It can also offer its services to normal commercial transactions. 

        International emergency aid and project-driven organizations employ them to source and distribute relief goods. All these services need to be provided rapidly and efficiently at the best price possible. 

        A procurement service provider can provide e-procurement hosting, management services, vendor management, supplier risk assessment, and writing contracts. 

        It is usually employed in the health, textiles, consumer goods, and agriculture sectors. 

        Their services can include managing the whole end-to-end process of the project. Some firms include quality assurance, logistics, shipping, and management of all financial transactions. 

        Reasons Why You Needa Procurement Service Provider

        Procurement needs a strategic and tactical approach in order to run smoothly. Here are a few reasons why a procurement service provider is needed:

        1. Brings onboard tactical labor

        We all know that procurement is a strategic operation that requires careful planning and the use of best practices. This is due to the fact that it needs to effectively meet its demands and keep spending at a minimum. 

        Hiring a full-time expert is expensive on the part of start-up companies. Due to this, procurement service providers became a viable option. 

        2. Provides supply chain management

        Disruptions in the supply chain are still lingering because of the pandemic and the ongoing war between Ukraine and Russia. 

        Due to this, it can affect the performance of an organization along the value chain which leads to costly delays. 

        Procurement service providers help organizations by having technical expertise that is essential for smooth operations. Additionally, it negotiates well with suppliers. 

        3. Analyze spending and suggest mitigation strategies

        We all know that besides profitability, the other goal of businesses is to reduce their costs. According to Smallbizgenius, 59% of businesses that outsource services reduce their overall expenses. 

        Procurement service providers can help analyze internal tail spend and formulate a customized cost reduction solution. 

        Steps in Selectinga Procurement Service Provider

        You should keep in mind that selecting a procurement service provider is as tedious as your procurement processes.

        Below are the steps you need to follow to get the best out of your procurement service provider needs:

        1. Establish the level of your need

        The procurement effort of an organization is as strong as the team or department behind them. 

        You need to know what your procurement team is currently lacking. Additionally, you need to check if the skill sets of your employees in the procurement are sufficient. This is to ensure that your procurement process will work efficiently. 

        You need to evaluate the strengths and weaknesses of the procurement team or department. This will enable you to see what skills and talents you need to fill to streamline your procurement process. 

        2. Know your desired level of PSP involvement

        Once you are done evaluating your needs, you will know the desired level of PSP involvement in your organization. This will allow you to still oversee and control your overall procurement process. 

        3. Consider offshore and onshore PSP

        Outsourcing offshore makes sense for the finances of the organization. In 2020, the global outsourcing industry is valued at $92.5 billion. 

        A lot of administrative tasks that can be done remotely are offered overseas by professionals. While the practical aspects of procurement can be done by local onshore procurement service providers. 

        4. Assess PSP affiliations

        It is worth noting that some procurement service providers act like brokers that link buyers and sellers together. Due to this, they receive a commission on both parties by introducing partnerships in their service offerings. 

        Sometimes, when the procurement service provider is involved in such dealings, there is a bias that surrounds it. You need to discuss the affiliation of the provider with your shortlisted candidates to effectively choose. 

        List of ProcurementService Providers

        For your procurement service needs, we have curated a few procurement service providers and consultant groups. Here are a few of them:

        1. Bain & Company

        Bain & Company is known as a global consultant. It has been operating for 48 years and continuously helps organizations define their own future. 

        Bain & Company helps organizations identify and realize cost savings across all spend categories and procurement levers. 

        Its services include strategic planning, cost-effective methods, capability building, and digital foundations and enablers. 

        2. GEP

        GEP is the leading provider of source-to-pay solutions in procurement due to its 20 years of industry experience. 

        It offers users a single, cloud-native procurement platform to control all direct and indirect spending easily. 

        The S2P procurement software of GEP offers end-to-end procurement functionalities with a comprehensive range of tools. 

        3. Oracle

        Oracle is a cloud technology company founded in 1977. It helps its clients innovate, unlock efficiencies, and become effective. 

        Oracle has created the world’s first autonomous database designed to help organize and protect customer data. 

        Its cloud procurement suite automates the P2P, strategic sourcing, and supplier management processes.

        4. Epicor Software

        Epicor Software was founded in 1972 in Austin, Texas. It provides numerous services crucial for procurement functions such as supplier relationship management, data management, risk management, financial management, and more.

        Epicore software solutions are designed to meet the needs of its customers and are responsive to the fast changes in the real world.

        5. Coupa

        Coupa empowers organizations with visibility and control to monitor their spending effectively. It is a cloud platform for business spend management. Its platform is designed to provide convenience and flexibility of access.

        6. SAP Ariba

        SAP Ariba is originally known as Ariba until its acquisition by SAP SE in 2012. It combines industry-leading cloud-based applications with the largest internet-based trading community to foster collaboration.

        SAP Ariba helps companies to digitize and simplify their entire procurement process through a single integrated platform in the cloud.

        7. Deloitte

        Deloitte’s procurement and sourcing practices have a proven track record of tackling new challenges in the procurement industry, enabling its clients to maintain measurable and impactful results.

        It offers integrated services that include audit, consulting, risk advisory, financial advisory, and more. It helps its clients to face high-stake challenges through customized solutions and experts using the latest technologies available in the market.

        Conclusion

        In conclusion, the growing demand for procurement service providers is a response to challenging global market conditions and the struggle of many buyers to negotiate favorable deals.

        By providing strategic planning, supplier collaboration, and leveraging an extensive supplier database, these service providers bridge the expertise gap for organizations, especially in non-core spending categories.

        The benefits include cost-efficient procurement, quick spending analysis, and flexibility. Understanding these advantages equips organizations to determine when to leverage procurement service providers effectively.

        Frequentlyasked questions

        What is a procurement service provider?

        A procurement service provider is a third-party firm employed to support the internal departments of an organization.

        What is its role in procurement?

        The role of PPP is to utilize professionals to work in an organization that lacks the expertise to take on the tasks.

        What are the services it offers?

        Procurement service providers usually offer their services for major relief and emergency projects.

        About the author

        My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.

        Marijn Overvest Procurement Tactics