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Centralised or devolved procurement

Posted on 23/05/2014 by Jamie Eaton in Category Managed Services
Recently, Comensura sponsored the ProcureCon Indirect 2014 in London. The event brought together over 150 senior procurement professionals from a broad spectrum of industries and geographical territories to discuss indirect procurement-related issues over two days. A significant number of the presentations across the two days made direct or passing reference to the age old debate of whether procurement should be centralised or not.

The cyclical nature of procurement practice (and for that matter business management theory) will probably mean this debate will continue into the foreseeable future. What was made clear from the presentations is that, regardless of whether a centralised or decentralised (such as right-sourced models) approach was utilised, it is critical that procurement departments provide greater value and a best-fit to the business. What this means in practice is:

  • gaining a better understanding of your internal stakeholders or customers

  • structuring procurement teams in a way that can both procure the goods and services required but also meet the needs of internal customers – such as helping to define requirements

  • learning to talk the language of the business –such as closer working with finance to ensure savings are quantified in the same way

  • moving away from ‘knowledge is power’ to ‘it’s good to talk and share ideas’

  • greater collaboration – which we’ll touch upon in a future blog

  • prioritising what procurement needs to control versus what it needs to devolve to the business.

Prior to ProcureCon Indirect 2014, we commissioned Spend Matters, to write a briefing paper on the topic of centralised versus devolved purchasing and the important role technology is playing in changing, thinking and enabling new operating models in procurement. With advances in technology, procurement has the opportunity to change the balance and combine both the advantages of centralised and de-centralised models. As the briefing paper states this will enable procurement to realise “that ‘devolved’ does not necessarily mean out of control, and ‘decentralised’ doesn’t necessarily mean unstructured.”

You can download a copy of the Spend Matters briefing paper here.

In relation to effectively managing temporary recruitment spend, the centralised versus devolved debate is a hot topic. As part of a neutral vendor managed service, technology acts as an enabler and the vehicle to facilitate control (centralisation) so procurement:

  • ensure budget holders only use approved suppliers who meet pre-defined standards

  • negotiate key elements of the contracts, such as price, terms and conditions and service levels

  • enforce negotiated prices for different categories of temporary staff and leverage buying capability

  • gain complete visibility of orders placed and what has been spent, with whom and for what reason

  • have easy access to supplier performance information and metrics such as fulfilment rates, speed of response to orders and quality of hire.

Our research of hiring managers suggests there is a very different view of what a managed service provider should deliver. They tend to want:

  • to be involved in selecting which recruitment agencies form a preferred supplier list

  • the choice to pick which recruitment agency to work with based on their hiring needs

  • the freedom to develop close working relationships with recruitment agencies to improve outcomes (such as quality of hire or faster response times)

  • easy to use technology systems that don’t add undue administrative burden to their day job

  • to ensure they get a fair price for their budgets.

With technology like c.net direct, the debate of whether to centralise or devolve procurement departments becomes less important. Modern technology can enable business to have central control of supplier contracts, service level agreements, temporary worker pay rates, recruitment agency margins and consolidated invoicing. Yet still provide devolved purchasing by enabling hiring managers to select from the approved agencies on a preferred supplier list. Procurement professionals can now take a lead on meeting the needs of all internal stakeholders across the business.​