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Procurement can be seen as a layered “stack” of activities working at different levels and with different benefits and overheads. I will describe the stack and how it applies to Outsourcing.

At the base level there is purchasing which is the activity of requisitioning, ordering, checking the delivery and paying the supplier. This is the engine room of the supply chain. There is typically no procurement optimisation or value derived but most of the organisation resource sits in this layer manhandling POs.

The next level is basic procurement which typically operates at the lowest competitive level specifying items to buy, getting competitive quotes and ordering items. Again this layer delivers only spot value and yet consumes significant resource often from the financial management community.

The next layer is strategic procurement. This is generally the point at which Category Management and properly leveraged and negotiated deals are done, where benchmarking and cost evaluation take place and where collaborative procurement is considered and executed.

Above this sits sourcing and at the highest point strategic sourcing. This layer contains make or buy decision making, designing, creating, executing and managing services, outsourcing, business process outsourcing and partnership arrangements. It is at this level where the experienced and skilful procurement professional can most influence the business direction and deliver the greatest benefits in terms of providing strategic advice, supplier and market intelligence, contracting, SLA and performance and commercial management for the contract term.

Clearly from this it can be seen that a enlightened company will want it’s best procurement resource supporting it’s project and strategic transformation teams, yet I constantly see the scarce and hard pressed procurement teams bogged down in the purchasing layer unable to give themselves sufficient headroom to think at the strategic level.

My advice is to put in place a lean and efficient purchase to pay process and associated system and drive this system to free up the procurement and financial teams to move up the stack and deliver strategic supply chain solutions to the business. P2P will give you spend analysis which will identify opportunities to consolidate spend, standardise, leverage – and save.