VIEW POINT

A RECIPE FOR MANUFACTURING

CLIENT DELIGHT: THE HYBRID MODEL
FOR INDIRECT PROCUREMENT
OUTSOURCING

Abstract
This point-of-view draws on our experience with one of our
client engagements, which involved a procurement outsourcing
project with category-specific sourcing especially MRO. The paper
articulates challenges common for projects of this nature as well
as other challenges that were unique to this client. It also details
our learnings and the frameworks we utilized to overcome these
challenges and deliver a win-win solution.
Initial hiccups in offshoring
When it comes to outsourcing, every new the initial months or the first year. geographical distance.
relationship between a client and a service
But typically, in contracts where a large So, while offshoring is generally used as
provider has its own share of unique
chunk of work is managed offshore a key lever to drive lower costs, many
challenges to address, going beyond just
even meeting agreed-on targets can get such projects face initial hiccups. This is
meeting the service level agreements
challenging. This happens due to the especially true when it comes to strategic
(SLAs). Building a relationship for the long
differences in cultural or work mindsets tasks involving multiple client stakeholders.
haul takes both time and close client-
and the lower levels of engagement due to
provider engagement, especially during

Typical challenges faced by

service providers
It is often the case that the client has vendor numbers for the same parts, catalogues not reflecting the business
used ineffective category management no Materials Replacement Planning requirements along with dated pricing
solution, no inventory MIS and Min/ impacting the ease of procurement,
methodology prior to outsourcing. Max levels not known, no abcxyz uploading of a supplier’s ‘unspecified’
This poses challenges for the service classification in SAP system, no catalogue content, many items bought
provider’s ability to extract value from provision for reviewing opportunities to from supplier not on catalogue,
leverage volume. increased spot buy requests, instances
suppliers through effective parts lifecycle
of the same items from different
management and engagement, which b. Poor stakeholder engagement - suppliers with different pricing
ineffective collaborative stakeholder
in-turn leads to significant downstream
engagements, no engagement with e. Immature indirect procurement
process impacts. indirect procurement, no change - low organizational maturity level
management in relation to indirect procurement,
Some such challenges the service provider inventory management, and equipment
c. Poor supplier relationship management. No interaction of the
needs to tackle include: management - no contracts with indirect procurement team with the
suppliers, evidence of poor supplier business, and low awareness of how
behavior, over pricing, poor service, no the departments work or who the key
a. Poor quality data - poor visibility
SRM in place or KPI monitoring stakeholders are
on demand and parts, unpopulated
description fields, using different d. Poor catalogue management -

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MRO complexities and the
MRO Maturity Assessment
Model
MRO complexity in a manufacturing typically expect that such learning is be overestimated. A halt in production
environment often cannot be understood, actively managed by the offshore team. has significant cost consequences in
unless the provider team closely engages The fact remains that no matter how a manufacturing set-up, running into
with the client. Typically, to generalists in difficult, the provider’s understanding of all several £1,000’s. Using the MRO maturity
the client organization, MRO commodities the complexity plays an important role in model below, providers can assess how
are low value items to be purchased. its ability to deliver value. the site is set up and its maturity, and if
Though there is much more to this For example, understanding how the components are missing then these can
complexity than can be envisioned site is set up, can lead to opportunity become potential savings opportunities.
offshore, such as culture, behavior, and identification. The importance of having Remember each site is different!
maturity of the organization, clients the right parts at the right time cannot

MRO Maturity Assessment Overview

Commodities Parts & Service Delivery Models

Part In-house OEM Manufacturers Distributors MRO Integrator

Servicing & Primary source of Supply Integrated delivery

Maintenance OEM products. consolidation – one client contact
Large number of across product and Data and
small service categories. information
manufacturers exist Reduced systems Integrated
in the market who transactions and supply relationship
Mechanical, Electrical, manufacture supplier helps minimize the
Gasses Oils & Lubricants Single services specific MRO management supply base and
products. Tail spend solution inventory costs.
A range of specialist May also act as an Option for
single services Integrator Storeroom
Services
management
services,
Tails Spend solution

Inventory Managed solutions

VMI CMI Vending

Contracted Suppliers

Catalog/
System / Process Automated reorder Punchout
based on Min/Max
inventory levels
Planned Preventative Maintenance (PPM), Materials Rework/Overhaul
Requirement Planning (MRP), Inventory parts programme
(insurance stock) On average 70% of
System - Computerized Maintenance MRP MRO spend Spot
Management Systems (CMMS) Buy

Reactive Maintenance, Non planned activity/Adhoc NMRP On average

Non-Contracted
(Repairs/breakdown), Non Materials Replacement Planning (NMRP) - 30% of MRO
Suppliers
Non Inventory parts, (according to abc,xyz classifications) spend
System – P2P eMarket places,
aggregators,
NMRP
V Card
Adhoc

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Comparing and contrasting the client site’s ways of working (WoW) with the maturity model, helps in understanding how inventory of parts
is managed, such as:
• If the MRP % is less than 70%, this can be increased by using data analysis, and more pushed in to the MRP system, which reduces the need
for spot buy

• If suppliers are not providing consignment managed inventory, there may be an opportunity. PPE is a good example, with reported
savings of between 25% - 45%.

• Though challenging, offshore teams need to understand the client’s QA processes, assess the site maturity, and enhance their awareness of
other factors influencing success.

The challenges for off-shore – Building site knowledge

Quality Assurance (QA) Assess Maturity Awareness

1. How is QA managed 1. How well established / mature on-site? 1. Warranties & Equipment/Parts
Examples of whay could be included: Indirect Procurement/Engineers 2. Specialist Tooling – Niche suppliers
Process materials (Contact with SR with Engineers/Procurement 3. Systems used (MRP/Inventory)
product) IMDS – Automotive Ind. Inventory Management 4. Data wont indicate:
Premium brand – Acceptance of 2. Understand data limitations 5. Limit Orders/Blank PO’s
alternatives Poorly classified Whether CMI/VMI on site, will impact
Lubs, Oils & Coolants – QA process Limitations of taxonomy if not utilisation oversight
standardised UNSPSC 6. Existing Services onsite
7. Challenging stakeholders
8. Employee Union involvement – likely to
impact employees in anyway (e.g. PPE)

Impact Impact Impact

Increased costs/time Level of difficulty Warranty invalidation
Unable to change supplier readily How to communicate Avoidance of high risk opportunities
Approval required from business identified during engagement

The IMDS (International Master Data System) is the automobile industry data system, initially it was a joint development of Audi, BMW,
Daimler, DXC, Ford Opel, Porsche, VW and Volvo

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Deploying the Hybrid model
for better client engagement
A good relationship with the client is key The quicker the provider relates to the they need to win hearts and minds.
to better understanding the complexities business culture and demonstrates worth, A hybrid model that leverages a mix of
of their ways of working, and hence crucial knowledge, and understanding, the onsite and offshore approaches is best
for successfully identifying and delivering quicker the relationship grows. For this, it suited to achieve these objectives. The
on savings opportunities. This is even more is essential for the provider team to meet figure below is our recommended hybrid
so in strategic procurement outsourcing, all the key stakeholders in their place of model framework in a manufacturing
given the nature of the work and the work, listen, learn, demonstrate capability MRO setup. Using this framework and
support required from the business. through understanding their processes, best-in-class category management
The business needs to have trust in the share knowledge and experience, and methodologies, we have successfully
provider’s capability before it will accept target communications to the key delivered significant savings opportunities
any identified opportunities. stakeholders based on their needs. In short, for our clients.

High
Service Placement
On-site deployment
Supplier Relation
Strategic Support

Management
S2P IT Category
Client Category Ownership strategy MRO/FM Category Specialist
Specialist
& Stakeholder Management
Category
management Winning Hearts & Minds
Need for proximity and specialist skills to service stakeholders

On-site Specialization
Strategic sourcing

Influence | Support | Upskill | Develop

Marketing Category Logistics Category
Tactical Sourcing

Aligned to client's operating Model

Tactical Support

IT Category MRO & Facilities

Offshore

Sourcing Support Category

Professional Ser. Category

Category Management Support

Helpdesk & PO
Management
Transactional Support

Purchasing and Payment Operations

Offshore

Catalogue

Activity: MRO

Helpdesk & Invoice

Shopping Carts 84% Catalogue Content 80% Spot Buy
Queries 70%
Low

Here, two specialist category managers minds” within the client organization. face-to-face, building relationships all
are deployed onsite. One specialist is The category managers deployed onsite around by physically walking around the
dedicated for the MRO category, while the can “win hearts and minds” by engaging work sites, and making the most of the
other specialist is responsible for all other with the client, forming emotional and opportunities that present themselves.
business needs. The offshore team provides intellectual bonds through understanding The resulting understanding gained
transactional and tactical support through the client organizational culture and their disseminates to the offshore team and
the category managers, who are otherwise ways of working. They do this by working enables them to deliver value in all areas.
primarily focused on “winning hearts and with stakeholders on site, meeting them

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Prescriptions for client delight
with the hybrid model
Maintaining only an offshore team for
outsourced procurement is an oversight
that can jeopardize the effectiveness of
a project. Enhancing the engagement
and creating a close bond through the
onsite deployment of specialist category
managers is therefore a key element in
delivering value. The hybrid model with
its due emphasis given to understanding
cultural gaps and the maturity of the
client organization in various dimensions,
enables the offshore team to adapt to the
clients’ ways of working, and thus ensures
its success.
Here are some learnings from some of our
successes using the hybrid model:

1. There is no “one size fits all” strategy nor

any “silver bullet” for MRO – the hybrid
model strategy will need to be unique
for each client.

2. True opportunities do not present

themselves, unless one spends time on
the manufacturing site

3. Apart from data, offshore teams have

limited tools to identify where the
savings opportunities lie.

4. Many savings opportunities involve

being run as projects; start with a
business case, and then adopt a
dogmatic approach to see it through to
successful conclusion

5. Buy-in from business and key

stakeholders can be difficult but needs
to be pursued to its logical end

The bottom-line? A successful partnership

is built by winning the hearts and minds of
the client. Real opportunities are identified
and delivered onsite with offshore support!

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Author
Phil Jones - Solution Design Sourcing & Procurement, Infosys BPM

Phil is part of our solution design team for Sourcing & procurement with over 30 years of experience with a
proven track record of success specializing in strategic sourcing, MRO and supply chain management. His
areas of expertise include sourcing, contract management, process mapping, and cost reduction. Prior to
joining Infosys BPM, had a successful career in the British Armed Forces (Royal Engineers) for 24 years and
during this time was a team leader instrumental in the development of the MRO business processes, sourcing,
procurement and roll out of an equipment management MIS for the British Army in, UK and Germany.

Phil holds an MBA in Employee Relations, Prince 2 Practitioner and is H&S qualified.

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