The Benefits of Outsourcing your Procurement for many businesses outweigh that from purchasing decisions are made in-house, and the task is frequently assigned to a single individual — the procurement manager. This procuring professional carries an enormous amount of responsibility. They play a significant role in determining the monthly duration of your company’s expense list. The list is practically endless.
Once a person has determined what products they require and what their budget allows, it is their responsibility to negotiate with suppliers and manufacturers. Obviously, they can only communicate with one supplier or manufacturer at a time, so the procedure is likely to be time-consuming.
And if they only purchase a limited quantity of a single product, they are likely paying a premium.
It is acceptable to manage purchasing decisions internally, particularly when it comes to direct spending. However, when managing indirect spend or tail spend categories, procurement teams have the option of outsourcing a portion of their strategic and tactical procurement responsibilities.
Outsourcing procurement may be less expensive and a more efficient use of time for many organisations. In addition, businesses that outsource procurement tend to grow faster and become more profitable than those that handle everything internally.
Due to the process improvements and efficiencies that purchasing companies can provide, companies that outsource certain purchasing functions can typically anticipate a 15 to 20 percent reduction in operating costs. Providers of procurement outsourcing have category specialists with sourcing experience that may exceed what your company has access to. Affording these categories special attention increases the amount of expenditures under management and maximises cost savings. Examine the internal cost drivers of your business to determine whether or not outsourcing would be beneficial. Numerous businesses decide to outsource procurement without evaluating the current status of their purchasing. If you are unaware of your current procuring costs, it is impossible to determine whether outsourcing will provide a net benefit. Determine expenditures by category. Catalogue and on-site spending should be noted within each category. Examine the volume of these transactions and how frequently you purchase each item. You will need this information to determine if you can get a better price on what you're buying or if you can purchase a superior product for the same price.
You can alter the focus of your procurement department by outsourcing certain procurement activities. When a third party handles the supplier search and contract negotiations, your team members have the opportunity to redefine their roles in order to focus on other procurement initiatives or core competencies. A third party, such as a group purchasing organisation, has already established vendor relationships, so their process can be rapidly applied to multiple categories.
By forming a partnership with a third party, you gain access to additional procurement resources. As a result of outsourcing, you now have access to category specialists who can offer advice and a broader supplier pool that can help you achieve your objectives.
When selecting a procurement partner to assist with procuring activities, ensure that the capabilities of the procurement company align with the goals of your organisation. If you're seeking to cut costs, the company should have a track record of assisting comparable businesses in lowering their supply costs. Similarly, if streamlined purchasing or improved products are your objectives, you will need to determine if the procurement company has achieved these goals for other businesses.
If the ongoing COVID-19 pandemic has taught us anything, it is that the ability of procurement to adapt to change and mitigate supply chain risks is more crucial than ever. By partnering with a third party for certain procurement functions, organisations can source from multiple vendors during supply shortages and gain access to a variety of robust contracts during supply chain disruption. The Benefits of Outsourcing your Procurement allows sourcing teams to adapt to change more readily while maintaining business continuity.