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Procurement as a Service for Europe

Cost Management: A Fundamental Necessity for Businesses Today

Cost containment is a business imperative, with the onus of this task often lying with the Purchasing and Procurement divisions. Their adept management of expenses can reverberate throughout the organization, impacting its overall health. Notably, the effects on profit generation are conspicuous, but there are also less overt yet significant implications on competitive positioning. Cost management further influences the enterprise’s financial stability, efficiency of operations, and flexibility in the face of change.

Overview of Procurement Operations in Large and Midsized Firms

Large businesses, due to the vast and complex nature of their operations, typically possess expansive procurement departments responsible for sourcing an extensive range of goods and services from countless global suppliers. Beyond the rudimentary purchasing tasks, these departments also tackle strategic facets like managing supplier relationships, negotiating contracts, mitigating risks, and controlling costs, thus ensuring procurement aligns with the wider business goals. However, mid-sized businesses may not always have the privilege of having large-scale procurement departments. Staffing these units can prove challenging due to limited resources and difficulties in attracting procurement specialists. Moreover, the challenge of maintaining a competent team that can handle all procurement elements – strategy, negotiation, supplier relationships, and compliance, can be daunting and cost-intensive. This is where Procurement as a Service can step in as a solution. Valenta is proud to offer an advanced and economical PaaS offering for our clients.

Definition of PaaS

Procurement as a Service, or PaaS, represents a business model where companies outsource their procurement roles to an external provider. This scheme enables businesses to benefit from the service provider’s specialized expertise, cutting-edge technology, and comprehensive supplier networks. PaaS can contribute to marked cost savings, superior operational efficiency, and augmented scalability in procurement operations. Furthermore, it permits businesses to pay more attention to their core duties, simultaneously deriving benefits from refined data analytics and enhanced risk management strategies provided by their PaaS provider. Valenta is an excellent consideration for your Procurement as a Service needs.

Leveraging Procurement as a Service

Through Procurement as a Service, businesses can draw on expert knowledge in areas of cost control. These providers are equipped with extensive proficiency and know-how in procurement practices, allowing for notable cost reductions with vendors and negating the need for costly internal procurement teams. These providers commonly employ advanced procurement technologies, artificial intelligence, and predictive analytics to yield maximum client benefits. Not only do they aid in risk management and strengthen supplier relationships, but they also significantly improve the efficiency of procurement processes. This leads to a decrease in time and effort required to secure goods and services. Additionally, these providers can dramatically improve compliance, reducing legal risks and ensuring alignment with standards and regulations. By relying on procurement specialists, companies can direct their attention to their core functions, subsequently enhancing overall performance and competitive standing.


Procurement as a Service Functional Overview

The following diagram illustrates all of the various aspects that can be included as part of Procurement as a Service.

Functions Included Procurement Service
  • Spend ManagementPaaS offers visibility into organizational spend, enabling more effective cost control and decision making. This includes detailed tracking and analytics of all procurement-related expenses.
  • Strategic SourcingPaaS providers leverage their expertise and market knowledge to identify and vet potential suppliers, ensuring the best fit for the company's needs. This also involves strategic negotiation to secure optimal pricing and terms.
  • ContractsPaaS helps manage contract lifecycle from negotiation to renewal, ensuring terms are favorable and adhered to by all parties. It also includes risk assessment to avoid contractual pitfalls and compliance issues.
  • Supplier ManagementSupplier relationship management is a key part of PaaS, involving regular communication, performance assessment, and issue resolution. This helps ensure supplier reliability and continual improvement of product/service quality.
  • PurchasingPaaS streamlines the purchasing process, reducing time and effort while ensuring that purchases align with company policies and budgets. It may also involve leveraging technology for automated purchase order creation and tracking.
  • Accounts PayablePaaS can include management of accounts payable, ensuring timely and accurate payment of invoices. This not only helps maintain good supplier relationships but also aids in accurate financial reporting and forecasting.

Additional Procurement as a Service Functions

Spend Assessment

A spend assessment is a process used by businesses, including procurement service companies, to analyze and evaluate their spending patterns, expenses, and financial activities. The goal of a spend assessment is to gain a better understanding of where money is being spent, identify areas of potential cost savings or inefficiencies, and make informed decisions to optimize spending through service procurement and improve financial performance. Here are the key steps involved in a spend assessment for a business.

  • Gather Data – Collect comprehensive data related to the business’s spending activities. This may include financial records, invoices, receipts, contracts, and other relevant documents that involve the procurement process.
  • Categorize Expenses – Organize expenses into categories such as operational costs, marketing expenses, employee salaries, supplies, overhead, and more. Procurement specialists help in identifying spending trends and patterns.
  • Analyze Spending Patterns – Use data analysis tools and techniques to examine spending patterns over a specific period. Identify areas where expenses are high or where there are fluctuations with the help of procurement as a service.
  • Identify Cost Reduction Opportunities – Pinpoint areas where cost savings can be achieved. This could involve procurement outsourcing service for negotiating better deals with suppliers, optimizing processes, eliminating redundant expenses, or finding alternatives for costly resources.
  • Vendor Management – Evaluate relationships with vendors and suppliers. Are there opportunities to consolidate suppliers, negotiate better terms, or explore new sources for materials or services through a procurement service provider?
  • Budget Review – Compare actual spending to the budget that was allocated for different areas of the business. Assess where the business has overspent or underspent and identify reasons for deviations.
  • Technology and Tools – Consider using spend analysis software or tools that can help automate the procurement process and provide visualizations of spending data, making it easier to identify trends and opportunities.
  • Risk Assessment – Evaluate the potential risks associated with spending patterns. This could involve identifying over-reliance on specific suppliers, potential compliance issues, or other financial risks related to procurement services.
  • Prioritize Actionable Steps – Based on the assessment, prioritize the actions that need to be taken. Develop a plan to address the identified cost-saving opportunities and implement changes as needed, possibly with the assistance of a procurement service provider.
  • Monitoring and Review – Continuously monitor spending patterns and track the results of the implemented changes. Regularly review the assessment to ensure that cost-saving measures are effective and adjust strategies, as necessary, with the support of a procurement specialist.

A well-executed spend assessment can lead to improved financial efficiency, increased profitability, and better allocation of resources within a business. It is important to involve relevant stakeholders, such as finance teams, procurement departments, and business leaders, in the assessment process to ensure a comprehensive and effective analysis. By leveraging procurement outsourcing service, businesses can further enhance their spend management capabilities.

Spend Management

Spend management, also known as expense management or cost management, refers to the processes, strategies, and tools that organizations use to control, monitor, and optimize their spending to achieve financial efficiency and meet their business objectives. It involves the systematic control and analysis of expenditures across various categories, departments, projects, or activities within a company, often with the support of a procurement service provider.  Spend management encompasses a wide range of activities and practices, including the following. 

  • Budgeting – Developing and maintaining budgets for different departments, projects, or initiatives to allocate resources effectively and track expenses against planned targets using service procurement.
  • Expense Tracking – Monitoring and recording all expenditures, whether they are related to operational costs, procurement, employee expenses, or other business-related activities, often aided by procurement as a service.
  • Vendor Management – Evaluating and managing relationships with suppliers and vendors to negotiate favorable terms, streamline procurement processes, and ensure competitive pricing, with the expertise of procurement specialists.
  • Procurement – Strategically sourcing goods and services, negotiating contracts, and selecting suppliers to optimize quality, cost, and delivery. A procurement service company can be leveraged for enhanced efficiency.
  • Invoice Processing – Efficiently processing and verifying invoices through the procurement process, ensuring accuracy and compliance, and minimizing late payments or discrepancies.
  • Expense Analysis – Analyzing spending patterns and trends with the help of procurement outsourcing service to identify areas of overspending, potential cost savings, and opportunities for operational improvement.
  • Policy Enforcement – Implementing and enforcing spending policies and guidelines, often in partnership with a procurement specialist, to control expenses and promote responsible spending behavior within the organization.
  • Technology and Tools – Utilizing software and technology solutions, such as spend management software or enterprise resource planning (ERP) systems, to automate and streamline spend management processes, including procurement as a service.
  • Reporting and Analytics – Generating reports and analytics with support from a procurement service provider to provide insights into spending patterns, budget adherence, and areas for optimization, helping leadership make informed decisions.
  • Risk Management – Identifying and mitigating financial and operational risks associated with spending, such as fraudulent activities, compliance violations, or wasteful practices, possibly through procurement outsourcing service.

Effective spend management can lead to several benefits for organizations, including reduced costs, increased profitability, better resource allocation, improved financial transparency, and enhanced overall operational efficiency. Leveraging procurement services, whether in-house or through a procurement service provider, is a critical component of financial management and strategic planning for businesses of all sizes.

Strategic Sourcing

Strategic sourcing is a procurement and supply chain management approach that focuses on optimizing the way an organization acquires goods and services from its suppliers. It involves a structured and proactive process aimed at identifying, evaluating, and selecting suppliers to achieve the best overall value for an organization while mitigating risks and maximizing efficiency. Key components of strategic sourcing include the below. 

  • Supplier Selection – Identifying and evaluating potential suppliers based on various criteria, such as price, quality, reliability, capacity, and financial stability. This involves conducting market research and supplier assessments to ensure the chosen suppliers align with the organization’s strategic goals.
  • Negotiation – Engaging in negotiations with selected suppliers to establish favorable terms and conditions, including pricing, payment terms, volume discounts, and service level agreements.
  • Contract Management – Developing comprehensive contracts that outline the terms, expectations, and responsibilities of both the organization and its suppliers. Effective contract management ensures that all parties adhere to their commitments and obligations.
  • Risk Management – Assessing and mitigating potential risks associated with supplier relationships, such as supply disruptions, quality issues, geopolitical factors, and regulatory compliance. Diversifying the supplier base and having contingency plans are common strategies to manage risks.
  • Total Cost of Ownership (TCO) Analysis – Taking into account not only the initial purchase price but also other associated costs over the entire product lifecycle, including transportation, maintenance, storage, and disposal. TCO analysis helps make more informed sourcing decisions.
  • Supplier Relationship Management – Building strong and collaborative relationships with key suppliers to foster open communication, innovation, and continuous improvement. This can lead to long-term partnerships that benefit both parties.
  • Technology and Data Analytics – Leveraging technology, such as procurement software and data analytics, to gather and analyze data related to supplier performance, market trends, and spending patterns. Data-driven insights aid in making informed sourcing decisions.
  • Strategic Alignment – Aligning sourcing decisions with the organization’s overall business strategy and objectives. Sourcing strategies can vary based on factors such as cost reduction, innovation, sustainability, and risk mitigation.

Strategic sourcing aims to optimize the supply chain, reduce costs, improve quality, and enhance overall operational efficiency. It involves a proactive and holistic approach to sourcing that goes beyond simply choosing the lowest-cost supplier. Instead, it emphasizes building strong supplier relationships and making decisions that align with the organization’s long-term goals.

CLM - Contract Lifecycle Management

Contract Lifecycle Management (CLM) refers to the process of managing a contract from its creation and negotiation through its execution, performance, monitoring, and ultimately, its termination or renewal. It involves various stages and activities aimed at ensuring that contracts are effectively managed, compliant with legal and regulatory requirements, and aligned with the goals of the parties involved. Procurement process expertise can enhance the efficiency and compliance of the contract lifecycle. The contract lifecycle typically involves the following key stages:

  • Contract Creation – This stage involves drafting the contract, specifying the terms and conditions, and defining the rights, obligations, and responsibilities of the parties involved. Procurement specialists often contribute to this stage.
  • Contract Negotiation – During this stage, parties negotiate the terms of the contract, addressing any discrepancies or disagreements. This process may involve revisions and back-and-forth communication until both parties reach an agreement. Procurement as a service can be utilized here to optimize the negotiation process.
  • Contract Execution – Once the contract is agreed upon, it is signed and becomes legally binding. This stage includes obtaining the required signatures and approvals. The support of a procurement service provider can add value at this stage.
  • Contract Performance and Monitoring – After execution, both parties fulfill their obligations as outlined in the contract. CLM includes ongoing monitoring and tracking of contract performance to ensure that all terms are being met. Service procurement practices can be employed to enhance contract performance monitoring.
  • Contract Compliance – CLM involves ensuring that the contract is being executed in compliance with legal and regulatory requirements, often with the aid of procurement outsourcing service. This may involve managing specific clauses, such as confidentiality, data protection, and other relevant terms.
  • Renewal or Termination – As the contract’s end date approaches, decisions are made regarding whether to renew, amend, or terminate the contract. This stage involves renegotiation or drafting a new contract, depending on the parties’ intentions. A procurement service company can assist in these processes.
  • Contract Archiving – After a contract has been fulfilled, it is important to retain a record of it for future reference, audit, or legal purposes. Contracts may need to be archived and stored securely. Procurement process methodologies can guide proper archiving.

Contract Lifecycle Management can be significantly aided by technology and software solutions, often referred to as Contract Lifecycle Management Software (CLM Software). CLM software helps automate and streamline various stages of the contract lifecycle, facilitating better visibility, tracking, reporting, and compliance management, often enhanced by procurement as a service. It can also help reduce risks and ensure that contracts are managed efficiently and effectively. Contract Lifecycle Management plays a crucial role in ensuring that contracts are well-managed, valuable, and aligned with the objectives of the parties involved. It’s an area where procurement service provider expertise can be leveraged to maximize benefits.

Procure to Pay

Procure to Pay (P2P) is a business process that encompasses the entire lifecycle of acquiring goods and services for an organization, starting from the identification of a need and ending with the payment to the supplier or vendor. It is a fundamental process within the broader field of supply chain management and is crucial for efficient and effective procurement operations.  The Procure to Pay process typically involves the following stages. 

  • Identify Need – The process begins with identifying the organization’s need for goods or services. This need could arise from various departments such as production, operations, marketing, etc.
  • Vendor Selection – The organization evaluates potential vendors or suppliers based on criteria such as price, quality, delivery time, and other relevant factors. This involves soliciting quotes or proposals from different suppliers.
  • Purchase Requisition – Once a suitable vendor is identified, a purchase requisition is generated. This is an internal document that outlines the details of the purchase, including the item, quantity, price, and other relevant information.
  • Purchase Order (PO) Creation – The purchase requisition is converted into a purchase order, which is a formal document issued to the vendor. The PO includes specific terms and conditions, delivery dates, payment terms, and other contractual details.
  • Goods Receipt – Upon receiving the goods or services, the organization verifies that they match the details specified in the purchase order. This step involves physically inspecting the goods, checking for quality, and ensuring the accuracy of the order.
  • Invoice Verification – Once the goods are received and verified, the vendor sends an invoice to the organization for payment. The invoice is matched against the purchase order and goods receipt to ensure accuracy and validity.
  • Payment Processing – After the invoice is verified, the organization processes the payment to the vendor based on the agreed-upon payment terms. This could involve manual or automated payment methods, such as electronic funds transfer (EFT) or checks.
  • Record Keeping and Reporting – Throughout the entire P2P process, records are maintained to track each transaction and ensure compliance with financial and procurement regulations. These records are used for financial reporting, analysis, and auditing purposes.

Efficient management of the Procure to Pay process is essential for organizations to control costs, streamline operations, maintain good relationships with suppliers, and ensure timely delivery of goods and services. Many organizations use specialized software and systems to automate and optimize various stages of the Procure to Pay process, leading to increased accuracy, reduced cycle times, and improved overall procurement efficiency.

Supplier Lifecycle Management

Supplier Lifecycle Management (SLM) refers to the process of managing all aspects of a supplier’s relationship with an organization throughout the entire lifecycle of that relationship. This encompasses various stages, from the initial selection and onboarding of suppliers to ongoing performance monitoring, relationship enhancement, and even the eventual offboarding or termination of the supplier.  Key components of Supplier Lifecycle Management may include the following. 

  • Supplier Selection and Onboarding – This stage involves identifying potential suppliers, evaluating their capabilities, assessing their compliance with company requirements and regulations, and completing the necessary documentation and agreements to establish a formal business relationship.
  • Supplier Performance Management – Once a supplier is onboarded, ongoing monitoring of their performance becomes crucial. This includes tracking key performance indicators (KPIs), quality metrics, delivery timelines, and other relevant factors to ensure that the supplier is meeting the organization’s expectations.
  • Supplier Collaboration and Relationship Enhancement – Effective SLM involves fostering a collaborative relationship with suppliers. This might include regular communication, sharing of insights and information, joint problem-solving, and working together to identify areas for improvement.
  • Risk Management – Organizations need to assess and mitigate potential risks associated with their suppliers, such as financial instability, geopolitical issues, regulatory compliance, and supply chain disruptions. Supplier Lifecycle Management should involve strategies for identifying, assessing, and mitigating these risks.
  • Contract and Relationship Renewal –  Supplier contracts typically have expiration dates or terms. SLM involves managing the contract renewal process, renegotiating terms if necessary, and ensuring that the supplier relationship continues to align with the organization’s goals and needs.
  • Supplier Offboarding or Termination – In some cases, an organization may need to end its relationship with a supplier. Proper offboarding processes ensure a smooth transition and help protect the organization from disruptions in its supply chain.
  • Technology and Tools – Many organizations use specialized software and tools to streamline and automate various aspects of Supplier Lifecycle Management, such as supplier performance tracking, risk assessment, and communication.

Effective Supplier Lifecycle Management can lead to benefits such as improved supplier relationships, better supply chain efficiency, reduced risks, and enhanced collaboration for mutual growth. It’s a strategic approach that recognizes the importance of suppliers as valuable partners in achieving an organization’s objectives.

The Valenta Way and Procurement as a Service

Getting started is easy with the Valenta Way process. Our engagement starts with a risk free initial assessment. From there, we will build a customized proposal for your business. Only if we agree will we move to the contract stage. Once we have an agreement, we will do in-depth assessment and goal setting. We will then prepare extensive documentation, develop our solution, and begin executing. We will provide ongoing reporting and visibility throughout our engagement. Please find the following diagram describing the Valenta Way process as it relates to procurement as a service.

Every Valenta Procurement as a Service engagement includes business leaders with expertise in procurement. The team supporting our clients will also include a Valenta Managing Partner. Valenta has Managing Partners located in cities around the world. In addition, to local, regional, and onshore experts Valenta will also include offshore resources to keep costs down and provide the most cost effective solution.

Valenta Expertise

We have experience with the following Procurement, ERP and Financial software.


and more…

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