Is procurement in the service industry overlooked and undervalued?
Procurement plays a crucial role in ensuring that the right materials and services are obtained at the right price, quality, and time, supporting the overall success and efficiency of the business. Procurement can involve purchasing raw materials, equipment, or even outsourced services, and it works closely with other departments like finance, operations, and marketing to ensure alignment with business objectives.
The Global Procurement As a Service (PaaS) market is expected to grow from US$ 7.03 billion in 2024 to US$ 15.12 billion by 2031. This growth is driven by businesses seeking to optimise their procurement processes, reduce costs, and streamline operations through outsourcing.
Procurement has traditionally been seen as a back-office function, with little visibility or involvement in strategic decision-making. However, this perception is changing, as businesses increasingly recognise the value of procurement in driving cost savings, innovation, and operational efficiency.
In the service industry, procurement faces unique challenges such as the need to manage a diverse supplier base, ensure the quality of intangible services, and navigate the complexities of service contracts. Despite these challenges, procurement is vital in maintaining service quality, managing supplier relationships, and ensuring cost control, ultimately contributing to the success and sustainability of the business.
A significant 74% of supply chain leaders have increased their investment in supply chain technology and innovation. This trend reflects a broader shift towards automation and data-driven decision-making, helping procurement teams optimise sourcing, improve efficiency, and reduce risks in the supply chain. As businesses face increasing pressure to adapt to changing market conditions, leveraging technology becomes a key enabler of success.
Understanding procurement in the service industry
In service-focused businesses, procurement is crucial for ensuring the continuity of operations, optimising service costs, and maintaining high standards for customer satisfaction. It involves a wide range of activities, from outsourcing IT support to negotiating contracts for marketing services or facility management.
Effective supply chain risk management is essential for any business, but in the service industry, it has an even greater impact on company brand value. Research shows that robust risk management in the supply chain can deliver over 70% additional value to a company’s brand. By proactively identifying potential disruptions—whether from suppliers, geopolitical factors, or market shifts—companies can protect their reputation, ensure consistent service delivery, and avoid costly disruptions that could harm customer trust.
Repositioning procurement as a strategic function
To fully harness its potential, organisations need to reposition procurement from a back-office role to a strategic business function. Steps to achieve this include:
- Investing in skills and technology: Equip procurement teams with modern tools and training to enhance their strategic capabilities.
- Aligning with organisational goals: Integrate procurement into broader business strategies, such as customer satisfaction, sustainability, or innovation objectives.
- Promoting visibility and influence: Ensure procurement has a seat at the decision-making table by showcasing its impact on cost savings, risk mitigation, and value creation.
The future of procurement in the service industry is shaped by digital innovation, a commitment to sustainability, and a shift towards collaborative supplier relationships. As businesses recognise procurement’s potential to drive strategic outcomes, it will increasingly be seen as a critical enabler of efficiency, resilience, and competitive advantage. By embracing these emerging trends, organisations can unlock procurement’s full value, ensuring they remain agile and successful in a rapidly changing world.
Drive efficiency in procurement with Kronos Group
At Kronos Group, we specialise in procurement consulting that empowers businesses to optimise processes, reduce costs, and unlock value. Our tailored strategies and expertise help organisations streamline procurement operations, build strong supplier relationships, and embrace digital transformation. By aligning procurement with your strategic goals, we enable better decision-making, enhanced efficiency, and sustainable growth
