Procurement Service Provider — The Ultimate Guide of 2022
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.
What is a Procurement Service Provider?
A procurement service provider is a third-party firm or consultant which is hired to support the internal procurement departments.
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 Procurement Service 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.
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Its Service Offerings and 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 Need a Procurement Service Provider
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 Selecting a Procurement Service Provider
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.
Procurement Service Provider Companies
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.
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.
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.
Frequently asked questions
1. What is a procurement service provider?
A procurement service provider is a third-party firm employed to support the internal departments of an organization.
2. 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.
3. What are the services it offers?
Procurement service providers usually offer their services for major relief and emergency projects.
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