Procurement’s role in outsourcing
We have briefly mentioned earlier that Procurement function should play a major role in make-or-buy decisions. On the other hand, research indicates that Procurement has had relatively moderate involvement in the outsourcing investigations in many firms. Given the nature of the decision, Procurement should be heavily involved in outsourcing as they can add value to the decision in the following ways:
1. Providing a comprehensive, competitive process
2. Identifying opportunities for outsourcing
3. Aiding in selection of sources
4. Identifying potential relationship issues
5. Developing and negotiating the contract
6. Monitoring and managing the relationship on an ongoing basis
In terms of Procurement’s value proposition, appropriately skilled and knowledgeable Procurement executives should be able to affect value in the initial exploration of alternatives leading up to an outsourcing decision rather than after the decision has already been made.
The strategic importance of make-or-buy, in sourcing and outsourcing decisions is so high that great care needs to be exercised to make sure these decisions are right. Obviously, appropriate procurement inputs critical for these decisions as well as Procurement management subsequently to ensure the success of whichever option that has been chosen.
|Question to activity 5.6
||Suggested answers to activity 5.6