3 minute read 3 Feb 2023
GBS procurement

Why is reimagining procurement through the Global Business Services model the need of the hour?

By Nikhil Kumar

Partner, Business Consulting, EY India

Seasoned professional in corporate and global business services transformation; GCC and outsourcing

3 minute read 3 Feb 2023

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The GBS model provides a unique opportunity for procurement to identify synergies and savings opportunities.

In brief

  • Complex operations are constantly nudging the procurement narrative to evolve.
  • GBS can support procurement across the source to pay value chain.
  • Organizational leaders are increasingly adopting this unique model to reinvigorate procurement.

Across the globe, the pandemic tested the speed, agility, and robustness of procurement models. As the pressure on cost effectiveness increased, legacy procurement methods, inadequate technology usage, and a lack of risk mitigation strategies were brought to the fore.

During this time, Global Business Services (GBS) or Shared Service Centers demonstrated resilience and high levels of preparedness, delivering technology enabled services and leading their way to the new normal. The same encouraged organizations to leverage an integrated ‘Global Business Services model’ on the road to recovery. 

The extent to which GBS can be leveraged is directly linked to maturity of the procurement methods of process, technology, people, and data. The higher the maturity, the more processes can be moved to GBS, enabling an efficient and cost-effective procurement operating model.

Procurement GBS operating model

The GBS model provides a unique opportunity for procurement, with a central view on sourcing across the organization that can help identify synergies and saving opportunities. GBS also enables driving standardized procurement processes and formalized ways of working across markets, which has historically been a challenge for the procurement function.

The procurement GBS operating model comprises three layers – namely front, middle, and back offices. Typically, the front office is retained onshore, and the middle and back offices are supported by GBS. The shift in an operating model from a single front office layer to a multi-layered structure has led to the emergence of new roles in procurement such as Procurement Business Partners that would focus on stakeholder partnering, demand planning, etc. Changing external factors has also led to new roles such as sustainability leads, supplier diversity leads and procurement analytics leads. 

To operationalize a GBS model, technology is a key enabler across various tools. The core procurement tools include buyer and supplier portal, and the enabling tools include real time dashboards, service management tools, intelligent automation and chatbots.

In a dynamic procurement landscape, procurement leaders should focus on the below five priorities to identify synergies and savings opportunities:

  1. Focus on building capability centers

  • Tapping into global synergies through a consolidated view of procurement. 
  • A shift towards a service-driven procurement culture. 
  • Leveraging a mix of delivery models such as GBS and CoEs.

   2. Increased focus on business partnering

  • Working closely with stakeholders in demand planning. 
  • A new perspective on category strategies in light of disrupted supply-demand dynamics.

  3. Streamlined and digitalizing processes

  • Streamline and formally define key procurement processes with a focus on improving user experience. 
  • Enable category specific processes wherever applicable.
  • Enable automation and integration of procurement systems to reduce manual effort.

   4. Sustainable and diverse sourcing

  • Procurement taking the lead in driving the enterprise’s ESG agenda. 
  • Adding sustainability as a sourcing selection criterion, introducing sustainability KPIs in contracts, monitoring ESG compliance.

   5. Data-driven decision making

  • Define metrics and KPIs to track procurement performance across markets, categories, suppliers, etc. 
  • Enable performance management through real-time dashboards.

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GBS can support procurement from start to finish. The model serves as an organization's procurement transformation engine and is effective in reducing operating costs and enabling end-to-end process uniformity.

About this article

By Nikhil Kumar

Partner, Business Consulting, EY India

Seasoned professional in corporate and global business services transformation; GCC and outsourcing