Procurement Outsourcing

Does Procurement Outsourcing Actually Work?

Procurement Outsourcing
Via Flickr by Andy

The ability to outsource specific tasks is a big help in many industries, but when it comes to procurement and supply chain management, is outsourcing really a worthwhile solution? Procurement outsourcing is beneficial, but also has disadvantages. It’s important to know a bit more before you decide to outsource.

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The Benefits

There are obvious advantages to outsourcing, whether it’s procurement tasks or marketing. Firstly, outsourcing frees up time and resources that are better spent on other activities. Other surface benefits include:

  • More control over spending
  • Better compliance
  • Focused knowledge and ability
  • Increased savings
  • Latest technology and strategy

The Downfalls

While the primary advantages seem worthwhile, procurement outsourcing can cost a company more in the long run if they’re not careful. The biggest concern is choosing a reputable firm to handle your procurement needs. In an ideal situation, the experts handling your procurement can deliver all the benefits above, but many procurement outsourcing firms are lacking in at least one vital area.

Choose a company that:

  • Has verifiable experience with the products you need to buy.
  • Practices the most effective strategies and makes use of the most efficient technologies daily.
  • Looks at the end results and not just immediate savings.
  • Handles activities in-house and doesn’t outsource as well.
  • Has a history of successful risk reduction in addition to cost reduction.

Promises satisfaction, not just savings.

Who Should Outsource Procurement Processes?

Companies of all sizes can take advantage of procurement outsourcing, regardless of industry, but some can benefit more than others. Outsourcing holds different benefits for different types of businesses as well.

Large Corporations

Large businesses typically have the resources to handle procurement in-house, but may choose to outsource to gain better control over spending or to streamline the process.

Small and Medium Businesses

Outsourcing improves savings by allowing several businesses to combine orders. Many small companies don’t have the resources for a dedicated procurement department.

Manufacturers

Procuring raw materials for manufacturing is closely related to company operations. Outsourcing is only beneficial if you work with an experienced firm that communicates consistently.

Retail Chains

Resellers can benefit the most from procurement outsourcing, particularly those dealing with clothing or fashion products. A procurement firm that deals specifically with a company’s primary product can reduce risks and costs for any retailer, even large chains.

Making Procurement Outsourcing Work

As stated, any company can successfully outsource their procurement processes and improve profits by doing so, but only if you do your homework first. The most effective procurement methods integrate into the entire supply chain management process for a seamless operation with minimal wasted resources.

Before you decide to outsource purchasing, consider the following aspects as well:

  • Improvements and innovations: If product improvements and recent advancements are important, seek out a procurement firm that specializes in your specific market.
  • Logistics: Most procurement firms deal with transport but may not always place enough importance on the long-term costs and risks associated with a carrier. Discuss logistics strategies before outsourcing.
  • Warehousing and storage: A comprehensive supply chain management process that accounts for purchasing, transport, freight storage, and end warehousing saves time and money over time.

Procurement outsourcing is not a task to take lightly, but with the proper approach any business can make outsourcing a successful and beneficial part of their supply chain management process.[/show_to]

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