Introduction

In the current economic climate where achieving top-line growth is challenging, organizations are increasingly thinking about creating bottom-line impact by optimizing the procurement function. While most organizations have developed in-house expertise in managing the core procurement spend, the non-core spend management continues to be sub-optimal. According to Everest estimates, even a 5-10% reduction on this non-core spend can translate into a 1-3% bottom-line impact – significant under any situation, let alone the current economic challenges that organizations across the globe are facing.

Yet, effective management of non-core procurement spend is a vastly under-utilized optimization lever, primarily because of two reasons:

1. Limited access to deep expertise across a breadth of categories and lack of supply market intelligence make it difficult to source effectively
2. Lack of integrated infrastructure and operational discipline makes it difficult to sustain or realize sourcing savings

Procurement Outsourcing (PO) emerged as a solution to help companies improve management of non-core spend and capture significant savings which has generated increased interest and exploration. According to Everest analysis, spending on PO services has been growing at 20%+ annually. Today PO service providers manage more than US$140 billion of spend on behalf of their clients. The business case for PO is attractive - 5X to 10X ROI with a payback of around 12 months. But to ensure that a company realizes the targeted PO savings, it is important that all stakeholders understand what is required in making a PO initiative successful.

The purpose of this whitepaper is to educate stakeholders and help them ensure that they realize the full value from their PO initiative.The paper discusses:

• The power of non-core procurement spend in creating bottom-line impact
• Challenges companies face in effectively managing non-core spend
• Leveraging PO as a business optimization lever to improve management of non-core spend
• Key considerations for a PO sourcing initiative