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OUTSOURCING University of Portsmouth Hot Topic Event 18 October 2006 David Hewitt PSL Consulting Solutions Limited © PSL Consulting Solutions Limited ABOUT PSL CONSULTING Experts in procurement we provide strategic, operational and category-related solutions and services to the purchasing and supply community in both private and public-sector organisations throughout the UK and elsewhere. © PSL Consulting Solutions Limited ABOUT PSL CONSULTING OUR SERVICES & SOLUTIONS INCLUDE: • Health checks designed to unlock improvements in strategy or operations • Category sourcing support for discrete projects or a broad strategic analysis • Better buying - an added-value package for profit improvement • Our active consultant model that builds effective relationships with internal customers www.pslconsulting.co.uk © PSL Consulting Solutions Limited Join all nine dots with four straight lines… © PSL Consulting Solutions Limited 4 2 1 3 The answer lies outside the box… © PSL Consulting Solutions Limited OUTSOURCING • • • • • • Why do it? The business model The pros (and cons…) Is there a role for Procurement? Managing negotiations Critical success factors © PSL Consulting Solutions Limited WHY DO IT? Cost BAU In-house process re-engineering Outsource Time © PSL Consulting Solutions Limited OPTIONS • Spin-off in-house team or process to new stand alone business • Spin-off to existing business • Spin-off into a joint venture • Manage back-office services via an external consortium • Eliminate in-house team & vendorise © PSL Consulting Solutions Limited THE BUSINESS MODEL • We start with a doughnut: • Then decide how we are going to eat it… © PSL Consulting Solutions Limited THE DOUGHNUT CORE BUSINESS ACTIVITY Admin support ICT Training Finance Manufacturing HR Procurement Logistics & distribution Professional support services Property & facilities © PSL Consulting Solutions Limited THE ‘HANDS-ON’ MODEL The G-force case study… Hand the work to your outsource partner and under your design and output control let them manage it for you. © PSL Consulting Solutions Limited THE ‘HANDS-OFF’ MODEL The R-wave case study… The black-box approach. Let the outsource partner ‘bite off’ a bit of the business and get on with it for you. © PSL Consulting Solutions Limited PROs • Full cost visibility • Creates (opportunity for) higher-level capacity in your business • Horses for courses • Leverage potential • Raises profile of procurement © PSL Consulting Solutions Limited CONs • • • • Loss of ‘total’ control Potential HR/CSR exposures Inflexible contract management Long-term compatibility with partner © PSL Consulting Solutions Limited A ROLE FOR PROCUREMENT? • • • • Market knowledge Supplier management Communications Managing the negotiations © PSL Consulting Solutions Limited MANAGING NEGOTIATIONS • • • • • • Management control Change control Service levels KPIs Quality Billing • • • • • Escalation process Measurability Customer interfaces Open-book structure Incentivisation terms © PSL Consulting Solutions Limited CRITICAL SUCCESS FACTORS • Get the right contract • Understand all the costs • Don’t outsource skills that give you competitive edge • Only outsource leveragable activities • Enhance your procurement skills © PSL Consulting Solutions Limited ANY QUESTIONS? © PSL Consulting Solutions Limited