Key Differences Between Procurement Consulting and In-House Resourcing

Posted by Jim Kurtz on May 19, 2021 9:00:00 AM

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Procurement represents a potentially profitable organizational function in companies looking to maximize material acquisition and management benefits. Although it is complex and involves many steps and activities, applying effective management to those tasks can generate cost savings and drive benefits to the bottom line. Nevertheless, to meet company goals, procurement officers and staff members must face and overcome many challenges. 

Challenges Are a Given, and They Can Hurt the Bottom Line

Procurement professionals must be skilled at recognizing and managing the many obstacles and roadblocks that inevitably arise when directing a sourcing operation. Principle among these are:

  • Managing supply, quality, compliance, and other risks
  • Evaluating and managing vendors
  • Managing contract negotiations
  • Overcoming internal skills gaps
  • Creating and managing procurement strategies
  • Acquiring, managing, and using data
  • Handling process "shortcuts" within the organization that lead to inventory inaccuracies and procedure workarounds
  • Managing maverick spend

Procurement Consulting Closes the Gap

Continuous pressure to achieve high levels of day-to-day and long-term performance means managers continuously seek opportunities to improve. In today's demanding marketplaces, customers (internal and external) demand significant cost savings, faster delivery, and higher quality. 

One valuable resource that procurement managers turn to for industry best practices, the latest pricing data, and strategy tools is procurement consulting. These firms and individuals are skilled in current procurement methodologies, understand procurement operations, and have years of deep industry experience. They can bring crucial industry-wide procurement data, pricing models, and negotiating techniques to the table. Partnering with a skilled procurement consulting firm can quickly position a sourcing organization ahead of its competition. 

The most successful consulting engagements occur when the consulting firm complements the client’s experienced stakeholders rather than undermining their personnel and processes. When partnering with a consulting firm, the procurement department should expect to build a team between internal personnel and the consulting firm. The team then approaches procurement issues jointly with the shared objectives of reducing near-term material costs; establishing solid, recurring annual savings; and improving overall operations. 

Typically, procurement consultants bring unique expertise and data to a mutually beneficial relationship. When a procurement manager has the opportunity to work with a procurement consultancy, the result can be compared to immediately adding the resources of 3-4 additional procurement executives with subject matter expertise that spans hundreds of companies across numerous industries to ensure best-in-class practices and policies. 

Further, a single organization may have excellent abilities in one or two areas but have limited experience with the subtleties of and approaches to current contract negotiations, pricing models, invoice auditing, and cross-industry benchmarking. Procurement consulting brings a wide range of knowledge, data, and skills not often found in a single organization. 

How a Procurement Strategy Consultant Can Help Your Team

Combining the expertise of an in-house procurement group and an external consulting firm brings together complementary skills, data, information, and experience. When these forces are combined effectively, the result is a team ready to address the company's most critical challenges. 

Whether the requirement is to assess pricing structures, evaluate new vendors, or review contract terms and negotiations, the team approach yields quick and profitable results. Below is a table of broad topics and skills showing whether the capability is typically held by in-house personnel, consulting personnel, or both. You'll notice how a team effort brings all capabilities together. 

Item

In-House Personnel

Procurement Consulting

Company-specific knowledge of in-house procedures and terminology

-

Knowledge of company goals, objectives, and strategies

-

Knowledge of internal company policies and procedures

-

Company-specific historical vendor data and knowledge

-

Company stakeholder management and involvement

-

Knowledge of company-specific material, technical, and quality specifications

-

Knowledge of existing company inventory policies and procedures

-

Awareness of the current status of materials, both on order and on hand

-

Access to current company production schedules

-

Broad contract negotiating skills and background

Some

Broad range of procurement practices, approaches, and skills

Usually limited

Knowledge of industry-wide procurement practices

-

Access to industry benchmarking tools and techniques

-

Access to large procurement-related industry databases

-

Access to cutting-edge technologies such as AI, blockchain, and cloud computing

Usually limited

Access to industry-specific market intelligence

-

Access to pricing models and analytical tools

-

Techniques for analyzing internal data to find cost savings opportunities

-

Knowledge of recent developments and market trends such as changes in supply chain availability

Some

Global reach

-

 

Strategic Resource Management (SRM) consulting offers cooperative support designed to meet the challenges of any industry's procurement operations. From assisting with crafting procurement strategies to analyzing pricing and negotiating tactics, the SRM manufacturing and services division offers the experience and tools to help procurement managers both thrive and advance. As SRM's EVP of Business Development for Manufacturing and Services, I would love to schedule time to connect with you to discuss how we can help your business. To arrange a call today, click the button below and I'll be in touch. We look forward to the opportunity to be your procurement cost-savings partner.

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Topics: Manufacturing, Strategic Resource Management, SRM, Procurement Consulting, ManufacturingAdvisor, Procurement