Home / Expertise / Outsource Procurement

FOCUS ON STRATEGIC SPENDING

Outsource Procurement refers to the practice of enlisting an external third-party entity/ org to handle the administration and delivery of the procurement service.When companies opt for outsourced procurement teams, they can immediately tap into the knowledge and support of experienced procurement specialists. This approach eliminates the need to develop an entirely new internal team, along with the time required for that team to establish its structure, processes, and expertise.

When to Choose Outsource Procurement?

WHEN TO CHOOSE OUTSOURCE PROCUREMENT ?

  • When companies lack internal capabilities but desire swift access to procurement efforts (such as cost reduction, supplier management, and contract oversight).
  • When companies have internal procurement expertise within their departments but seek to outsource specific areas, such as indirect materials and services.
  • When companies view Procurement as a non-core, non-strategic function and wish to delegate its management to a procurement service provider.
  • When companies aim to rapidly develop a procurement function to achieve savings, with a willingness to cultivate this function internally over the medium term eventually.
Types of Outsourcing Procurement

DIFFERENT TYPES OF PROCUREMENT OUTSOURCING:

  • Direct procurement: Direct procurement is the acquisition of raw materials, goods, and services required for production. These transactions typically involve bulk purchases from a pool of trusted suppliers, aiming for the best balance of cost and quality. For example, a manufacturing company might outsource its direct procurement to a third-party supplier that can source and deliver the raw materials it needs to produce its products.
  • Indirect Procurement: Indirect procurement centres around sourcing services and suppliers crucial for the day-to-day operations of a business. These goods and services cater to internal stakeholders, such as business units and functions, rather than external customers. Examples include services related to marketing, shipping, IT, and HR.

BENEFITS OF OUTSOURCING PROCUREMENT

  • Reduced Supplier and Invoice Workload: Outsourcing procurement can significantly lessen the burden of managing suppliers and processing invoices, potentially reducing this workload by as much as 80%.
  • More time for strategic purchases: Outsourcing can free up businesses’ time and resources to focus on more strategic purchases. The process can be beneficial to businesses that need to focus on their core competencies or that need to make quick decisions about procurement.
  • Access to procurement resources: Outsourcing procurement can give businesses access to the procurement resources they need, such as expertise in strategic sourcing, contract negotiation, and supplier management. This can be helpful for companies that need more in-house expertise to manage their activities effectively.