THE BUSINESS REVIEW FOR PROCUREMENT LEADERS
With companies under increasing pressure to cut expenses and improve their return on assets, the dilemma of whether to keep key functions in-house or outsource them has taken centre stage. Manufacturing units are particularly in the spotlight, because of the rise of low-cost countries, but other critical activities such as HR and IT are also the focus of make-buy decisions.
The authors, consultants at Booz Allen Hamilton in London, argue that CPOs should play a “pivotal role” in determining a company’s course, leading business units in conducting detailed analyses that evaluate costs, benefits, risks and rewards, and challenging their organisations to make more objective and informed decisions.
They describe a framework designed to simplify this process based on three
pillars: business strategy, risks and economic factors. Among their contributions
in these areas, CPOs can act as independent arbiters in resolving which aspects
of the organisation are truly strategic; oversee risk assessments that are
more diligent than would normally be the case; and ensure that decisions are
made on the basis of total costs, not simply on estimates of existing in-house
costs versus those of an outsourced operation.
