As procurement outsourcing once again starts to grab headlines; one of the main arguments used by the BPO providers is the benefits of pooling – or to be more specific, the benefits of pooling volumes across company borders using the BPO provider as supplier interface. Unfortunately this reasoning mostly falls flat. Certainly there are categories which benefit from pooling volumes across company borders, but these are few and the largest potential savings are not realized due to increased volumes.
One rationale for pooling – especially in IM&S categories – is assortment standardization. Unfortunately for most buyers, local and regional needs and supply bases often obstruct any real savings in this area. In many cases, companies have a hard enough time to standardize their assortment internally; making pooling across company borders a paper dragon. The time spent on assortment standardization would quickly eat up any cost benefits, even when performed by an outside partner.
Suppliers will always approach business from a value perspective and the buyers need to be able to control that volumes are directed to their chosen suppliers. Contract compliance and committed volumes will make more impact on the bottom line than an increased volume addressed to one enterprise wide supplier.
So if a BPO provider approaches you with a pooling proposition, be aware, pay more attention to the provider’s category expertise, process efficiency and ability to monitor the contract after implementation. Because there areas of the BPO is what is going to really make a difference.
May 19, 2009 at 6:08 pm
I’m a territory salesman for a company that is the world wide leader in our industry, and more or less dominant in market share and our product category. We manufacture and sell durable hard goods.
Recently, I’ve lost some large orders to outsourcing. I was involved early (I thought) in the process only to find my customer(s) had outsourced all products (of my type) to a single company. And, I learned, that company had procured what they needed over a year prior to my involvement. The end result was that I had no chance of selling my products to the local entity.
Our products and service organization is superior in every way to our competition. But, I’m afraid we are being shut out of some opportunities due to BPO.
My question is this, should we have a sales person or department, that targets companies who are actively outsourcing? We have a traditional national account department, direct sales personnel, and distributors. But, I’m concerned, the primarily local focus is not winning the day.
Any comments or ideas?
Thank you.