Procurement Outsourcing

Have you heard about procurement outsourcing before?

Do you want to increase your understanding of the process of procurement outsourcing?

The process of procurement involves at least two companies a buyer company and a seller company. But, when you talk about procurement outsourcing, a third party gets involved.

In outsourcing, the key process of buying goods and services is transferred to a third party.

Hence, the procurement outsourcing company handles all the supplier management for your company and you can focus on the competency-based development of your company.

So, before you decide to go for the procurement outsourcing process to buy a large scale of goods and services, give this blog a read.

Table of Content

Chapter 1: Understanding Procurement Outsourcing – Why do Companies Prefer to use it?

Chapter 2: Advantages and Disadvantages of Procurement Outsourcing

Chapter 3: What Factors a Good Procurement Outsourcing Company should have?

Chapter 4: 9 Top Procurement Outsourcing Providers you can Choose for Upgrading your business

Chapter 5: Frequently Asked Questions About Procurement Outsourcing

Chapter 1: Understanding Procurement Outsourcing – Why do Companies Prefer to use it?

In this chapter, the details about procurement outsourcing are discussed.

Understanding Procurement Outsourcing

1. What is meant by procurement outsourcing?

Procurement outsourcing is the process that involves a third party for the large-scale purchasing of goods or services for a business.

It is sometimes used solely for the process of buying, while some companies use it for the entire process of purchasing services or goods through procurement.

The procurement outsourcing companies, when approached by a business, advertise the need for services and goods. With the applications from different vendors, they will analyze the proposals, and the best among them is selected.

Thus, the deal is done services or goods are purchased for the business, and the procurement company gets the commission for the deal.

Hence the act using a third party for the whole process of buying services and goods for a business is called procurement outsourcing.

The whole process of sourcing and supplier management is controlled by a third party – procurement outsourcing company.

They advertise, interview, analyze and then select the best seller for buying goods or services for your company.

2. 2 types of procurement outsourcing

types of procurement outsourcing

Procurement outsourcing is a complex process, their efficient business functioning can offer quality purchasing of large-scale goods and services to their client.

The major types of procurement outsourcing include direct and indirect procurement.

Direct procurement is the process of getting goods and services for production, same as productive procurement.

Most raw materials are bought through direct procurement, provide services like raw materials, product packaging and logistics, to external customers.

Indirect procurement is used to buy the goods or services that a company needs for its everyday activity. These goods and services are used for balancing the day-to-day requirements of a company.

The services bought by indirect procurement include HR services, marketing-related services, office services, utilities and, IT-related services, etc.

These services are helpful for internal stakeholders of a business. Indirect procurement is the most common outsourcing activity nowadays.

3.Why do companies prefer procurement outsourcing?

types of procurement outsourcing companies

The companies that outsource procurement have multiple reasons for doing so. But the main reasons are cost-cutting and focusing on the core competencies.

The companies already have a lot of things to deal with so, procurement only adds a burden to their work. Hence, it is a better idea for them to outsource procurement.

After taking benefit from procurement outsourcing a few times, the companies realize that the outsourcing procedure is not only good for decreasing costs, but also improves the quality of product and the outcome.

The companies realize that with procurement outsourcing, they can maximize the efficiency of staff by shifting their focus from fruitless tasks to their core purpose of hiring. It boosts competitiveness by the provision of the best tools and resources.

Procurement outsourcing can cut down costs and give stability to your business by a one-time hiring process. It also gives you diversity as the outsourcing company makes sure you get the best and most diverse goods and services.

4. How to make sure procurement outsourcing really suits your business?

For knowing whether you need procurement outsourcing or not, you will have to see your company’s long-term requirements. Sometimes the company’s requirement is very low so, they can manage the process by themselves.

compan's requirements

You should think that if you really need assistance in the process of procurement? Do you have no time to deal with procurement by yourself or not?

Outsourcing procurement can help you save time and invest it in some fruitful tasks. If you wish to have a diverse range of products or services, then procurement outsourcing can be helpful.

Because you cannot reach out to maximum vendors by yourself but, procurement companies can!

5. For which businesses are procurement outsourcing beneficial?

Procurement outsourcing provides almost 30% savings to a business and also reduces time wastage. The companies that aim to utilize their time for the development of their business are more likely to use procurement outsourcing to save their time.

Hence, if your company need to deal with complicated tasks and want to get high-quality services or goods with no active effort involved, then it is the most suitable for procurement outsourcing.

6. Process of choosing the most reliable procurement companies

The companies must find providers with long-term experience in procurement order placement. Procurement companies are called for a solution and experienced colleagues to join hands.

Process of choosing the most reliable procurement companies

It is the only reason why they provide consulting and technology solutions. They do not even have the ability or know-how to manage strategic activities.

The essential traits that you must look for are experience, customer service, and speed. Once you decide that you need a procurement outsourcing company, you should check all the available options.

The best procurement outsourcing company will be the one that has more experience, better customer service, and is speedy.

Chapter 2: Advantages and Disadvantages of Procurement Outsourcing

Procurement outsourcing has some pros and cons for the companies as nothing comes with benefits alone. Where it increases the efficiency and flexibility for the business owner, it also causes loss of control over procurement activities.

dvantages and Disadvantages of Procurement Outsourcing

1. Advantages of procurement outsourcing

Among the benefits of procurement outsourcing, following are the most applauded ones.

  • Enhancement of business efficiency

Outsourcing helps you focus on the core purpose of your business setup rather than wasting time on relatively less-important activities.

The main goals of a business are to increase sales and thus boost efficiency. All other things are secondary.

The procurement activities have been used for purchasing large scale of goods and services.

These goods and services help in the proper functioning of a business. Since, they are not actively involved in developing business, so it is a better idea to outsource procurement activities.

  • Cost-effectiveness

Cost effectiveness

Procurement outsourcing can help a business save almost 30% of total costs used in buying services and goods. Hence, we can conclude that the process of procurement outsourcing is cost-effective.

  • Stability due to single hiring campaign

The most beneficial part of procurement outsourcing is that you get goods and services for the long term, and hence your business gets rid of repeated hiring processes.

The procurement outsourcing process makes sure that you get the best goods or services, so that you can get benefitted for a long time. This creates a sense of stability which in turn helps the business to grow.

  • Diversity of suppliers

The procurement outsourcing companies allow the applications from different vendors so, when they select the final vendor/s, you get a diversity of suppliers.

You can get reach to the talent that you cannot gain by yourself. You are provided with a pool of service providers to create more variety for you.

  • Competitiveness

Competitiveness

There is always a sense of competition among businesses which are selling the same product or service. It is the era of smart work. The one who prefers working smartly wins the race.

So, while doing business, you should act smartly. Get rid of all the hurdles and time-consuming fewer value processes and focus on your main goal.

Procurement outsourcing is surely a way to enter the competition by getting the best products in the least time and effort and at the best rates.

  • Compliance tracking

The procurement outsourcing company provides you a comprehensive compliance tracking data that ensures you about savings.

In absence of compliance tracking program, you can lose your savings by the time the goods or services you purchased reach you.

  • Satisfied stakeholders

Satisfied stakeholders

Procurement outsourcing is good at satisfying stakeholders. It increases the overall business support. Hence, satisfaction of stakeholders makes it more trusted option for the companies.

  • Flexibility and focus

By outsourcing the procurement activities, your business can adjust to the rapid changing needs according to market demand. The procurement outsourcing process is very flexible in this regard.

Your focus increases once you have more time to ponder upon the things that actually matter. Procurement outsourcing can provide you that facility.

2. Disadvantages of procurement outsourcing

The disadvantages of procurement tracking are discussed below.

  • Loss of control over purchasing activities

Because you are not actively purchasing goods and services, you lose control over the process. So, to not get deceived you should connect to a highly acclaimed and reliable company.

  • Management of outsourcing

You cannot leave the procurement activities totally on the outsourcing company. You have to keep a track of all important things happening there and manage the process yourself. This is crucial for transparency and quality check.

Chapter 3: What Factors a Good Procurement Outsourcing Company should have?

Finding a good procurement company can solve maximum of your problems. This is because you will get more time to deal with the actual business-related issues.

You will not have to worry about the transparency or efficiency of a procurement outsourcing company.

A good procurement outsourcing company should have the following factors.

1. A good procurement outsourcing company should have enough experience

What Factors a Good Procurement

A good procurement outsourcing company should establish long-term relationships with suppliers. It can proved that it have already finalized many orders with multiple companies.

You can ask your outsourcing company how many previous orders they have closed and how satisfied their customers are.

Knowing more about their services will help you decide if you want to work with them.

Procurement outsourcing companies can only provide the best services if they have sufficient practice and understanding of the industry.

2. A good procurement outsourcing company can arrange their work well and complete tasks quickly

Poor timing affects the procurement process and thus affects the business. When you opt for a procurement outsourcing company you must look for the one that can provide quick services.

The company which can arrange their work well will help you start your import business faster.

This factor makes sure that the outsourcing company has the business foundation, it are always ready and can carry out the business at any time. Getting the procurement activities done quickly can make your business development a bit fast.

3. A good procurement outsourcing company is able to provide satisfying customer service

a good procurement outsourcing company is able to provide satisfying customer service

Customer service can be yet another way of deciding which procurement outsourcing company you should opt for. The problem is that several other things may happen, and they need also pay attention to what’s your review.

For example, you may consider that the final products that you received need some improvement. But when you give the suggestion to your outsourcing company, they don’t take care of that, it is a problem.

Hence, a company that is solely responsible for procurement outsourcing can reduce your burden. A procurement outsourcing company that pays more attention to customer service can be the best option for you.

Chapter 4: 9 Top Procurement Outsourcing Providers you can Choose for Upgrading your business

Now, you must want to know about the best procurement outsourcing companies available globally. This chapter is dedicated to the introduction of top procurement outsourcing companies.

1. IBM

IBM is one of the best procurement outsourcing companies in the world. It aims to accelerate the procurement activities of your company.

IBM provides many different solutions to their customers, such as artificial intelligence, automation, blockchain, and so on.

IBM

It has greater access to the talent pool, so it provides you with a diversity of goods or services. With the help of IBM, you will not only be offered business consulting services.

But also it can customize your own business strategy. IBM also provides hybrid multi-cloud services, talent management services, application services, security services, and tech support.

2. Accenture

Accenture is another option for speeding up the procurement outsourcing process. It claims to reduce your and 10 – 15% source savings. It follows responsible and efficient sourcing practices.

Accenture has 185 partners in their ecosystem, which ensures its ability of providing procurement outsourcing services. They have worked with more than 6,000 clients from 120+ countries. Its customer satisfaction obtains higher level.

3. GEP

GEP

GEP can be your next option for procurement outsourcing. It is dedicated fully to help you get the best of goods and services from across the world. GEP claims to help hundreds of Fortune 500 companies.

GEP considers that its job is to deliver extraordinary value for its customers.

They offer services like spend analysis, category management, low-cost country sourcing, to help the customers meet the most pressing challenges, and enable them to follow the newest global trends.

So, it will be a good idea to keep GEP as an option for procurement outsourcing.

4. Genpact

Genpact stands out among all of the procurement outsourcing companies. Genpact was awarded the top procurement outsourcing provider award for three consecutive years.

It offers many business services, and also supply chain management, credit risk management, and so on. With its help, you can easily get a good result in the procurement business.

5. Pcura

pcura

Pcura is a procurement outsourcing company that is concerned with direct procurement primarily.

It has been serving Fortune 500 companies for the past few years. Pcura is famous for its full set of procurement services, it helps customers complete their sourcing needs.

Pcura also focuses on saving costs and keeping the total expenses low. It provides procurement transformation and supply chain optimization services, so that, the team can easily deliver sustainable cost saving service for your business.

6. Tata Consultancy Services

Tata Consultancy is a leading IT services and procurement outsourcing service provider. It ensures to deliver real results to the global businesses.

It has more than 324,000 consultants from almost 46 countries of the world.

If you decide to work with Tata, you will not only be offered business consulting service, but it also can handle internet of things, blockchain, quality engineering and so on.

Thus, Tata consultancy service can be your next favorite procurement outsourcing service provider.

7. HCL Technologies

HCL Technologies

HCL technologies claim to cut your procurement costs up to 50% and also reduce the time used in procurement and sourcing. HCL Technologies has a global team having domain experts, so it augments the sourcing solutions.

8. SYNNEX

SYNNEX Strategic Procurement is a platform that recognizes the unique manufacturing needs of the companies. It bridges the gap of needs between the sellers and vendors.

SYNNEX Strategic Procurement uses advanced technologies to meet the requirements of procurement. Their web of vendors is extensive, so you get the maximum diversity from single procurement.

9. Infosys

Infosys

Infosys is also a good procurement and outsourcing company that uses artificial intelligence and other new technologies to meet your needs.

It has a huge pool of talent/goods so, you can get benefit from the most diverse options available.

Chapter 5: Frequently Asked Questions About Procurement Outsourcing

FAQs

1. How to know whether the procurement outsourcing company is reliable or not?

To know if a procurement outsourcing company is reliable or not you will have to check their portfolio. You can only trust anyone when you have seen clear examples of their services.

This will help you to know the commitment of a company and its reliability. A company that delivers most of its orders is the most reliable procurement outsourcing company.

2. What are the three components of the procurement outsourcing process?

The three most important components of the procurement outsourcing process are:

  • The people involved
  • The process followed
  • The paperwork related to procurement outsourcing

Smaller procurement companies have a smaller number of people involved and vice versa.

A reliable procurement outsourcing company makes sure that the process is smooth and the procurement plan is efficiently functioning.

The paperwork is necessary for each step because it keeps the buyer as well as the seller updated about procurement.

3. Does procurement outsourcing follow any accountability criteria for transparency?

The process followed by the procurement company for selecting vendors has to be unbiased so that you can get the best and not average quality goods.

Hence, the ethics and transparency of the people working in a procurement company are important, and they should be held accountable.

Most procurement companies take due care of keeping the selection process unbiased and scam-free. The practice of keeping records helps all the people involved to be accountable, and thus the process remains transparent.

4. What activities does procurement outsourcing entail?

Procurement outsourcing involves the following steps.

  1. Selection of vendor
  2. Negotiation regarding payments
  3. Vetting vendors strategically
  4. Final Selection of the best vendor
  5. Negotiation regarding contact
  6. Final Purchase

Conclusion

With this blog, now you may have a complete understanding about procurement outsourcing.

You can decide whether you need a procurement outsourcing company to help in your business or not now. The next step is to find good outsourcing companies, which we also list some good ones for you.

Although it is a complex word to understand, but once you choose to work with them, you can care-free about your procurement business.

However, if there is still confusion about procurement outsourcing, you can contact us, and we will be glad to answer your queries.