Procurement Shared Services

February 28th, 2007 at 06:00am David Bush - Iasta

“International companies spend approximately 1% of their overall procurement costs on administration. The goal of using Shared Services in procurement is to improve the input-output relationship between the procurement processes… Any procurement process that is not a key procurement competency can be considered as a candidate for Shared Services.”

So begins the chapter in a recent CapGemini report for Strategies and Insights for Today’s CPO. Iasta has a fairly large and diverse client base, some of whom use a Shared Services frameworks and others that do not. Consequently, I was interested to see the benefits broken down in the report.

• Lowering the costs of predominantly administrative procurement processes.
• Improving performance and service quality.
• Synergising stemming from economies of scale in processing.
• Improving performance management from process transparency.
• Unburdening procurement departments from routine activities, so allowing them to focus on core procurement tasks.

I have seen these programs be successful when done in-house or outsourced and they make logical sense, when structured and implemented correctly. CG reports cost reduction of 10-30% on average and payback cycles of 2-3 years, mostly due to reduced personnel costs and efficiency gains.

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Entry Filed under: Analysts/Research, General, Supply Management Best Practices