Outsourcing procurement services by engaging Procurement service providers: Pros and Cons

Finance

Some of the world’s top organizations outsource major segments of their IT operations. Such projects have over the time proven the efficiency of outsourcing as well as the value of off shore projects. These days, the trend is to outsource business processes to domain specialists as they feel that some of these activities are non-core in nature.

With good infrastructure and expertise and with the advancement of technology and data management systems, it is easier to manage business processes from any corner of the globe. Whether transactional, tactical or strategic, often end-to-end operations are handled by zeroing in on the right procurement service providers and domain specialists. The below-mentioned information will prove to be handy to weigh the pros and cons of outsourcing procurement services.

What are the components that can be outsourced?

Procurement outsourcing is a process wherein the organizations take a calculated approach of moving some of their systems and processes around source to pay to a specialist. This involves demarcation of core and non-core activities and then mapping them accordingly.

Some of the processes involved include the following:

  1. Full outsourcing – this is not very popular with only about 17% of global bigwigs opting for it. Only market leaders opt for this route.
  2. Incremental outsourcing – survey shows 83% opt for this.
  3. Hybrid outsourcing – outsourcing of a mix of strategic and transactional activities.

On the whole, going in for such kind of process management has improved corporate performance. Procurement outsourcing has definitely added the edge of achieving strategic value as well as major cost cutting. 

What are the pros and cons of procurement outsourcing?

Procurement outsourcing has a bounty of benefits. Some of the pros are mentioned below:

  • It lowers the transactional procurement cost
  • It creates an opportunity for head-count rationalization and re-focussing on strategic areas
  • Procurement outsourcing improves the scope for market intelligence and supplier intelligence
  • Pricing betterment is sure shot end result.
  • Greater spends visibility is one of the most valued outcomes.
  • It increases the opportunities for transformational initiatives across people, process, and technology
  • Further, it strengthens opportunities for process standardizations and application rationalization.

While the pros are many there is a downside to the same too. Some of the issues faced are as follows:

  • Time management and handover issues. One should have a detailed transition plan to avoid gaps.
  • Not having direct control in overseeing day to day activities.
  • Missing out on certain key compliance issues
  • Lack of awareness of operations by the in-house team. If they treat outsourced business as an external entity and not stay abreast then issues will surely surface.

Why pros eventually score?

Weighing both the benefits and risks, it is evident that the smarter thing to do would be to opt for the same. In fact, from as back as 2001, companies have been doing the same as it has given a new dimension to procurement and firms have started concentrating on value levers in tactical and strategic fronts. New set-ups already have a head start when they use this proven system to accelerate their growth.

This has tremendously helps contain spends and helped standardize process and systems in an optimal way while creating great scope for new areas of focus as the pros are beneficial in the long run.

Author Bio:-

Amy Jackson is a lead technology writer and she has an array of experience in Technology and software industry. Currently, she has been writing about Supply chain optimization solutions, Predictive Analytics Solutions and Outsourcing procurement services.  Follow her on Google+ and learn more about the latest tech trends.

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