Outsourcing of the Procurement Function – Is it Possible?

YouTube video

In today’s episode of the Supply Chain Show, we will be diving into an interesting topic – outsourcing of the procurement function. As supply chain professionals, we understand the importance of standard processes and the potential for outsourcing specialized workflows. Just like services such as demand forecasting and ERP data cleanup are being outsourced, the procurement function can also be outsourced to specialized companies.

To shed more light on this topic, we have invited a procurement consultant, trainer, advisor, and expert who has years of experience in the field. She will provide valuable insights into the possibility of outsourcing various parts of the procurement function.

Before considering outsourcing, it is crucial to understand which aspects of the procurement process can be outsourced. This requires dividing the procurement process into smaller parts and analyzing each one to determine its suitability for outsourcing. Approximately 10-12% of procurement functions are outsourced each year, indicating that non-strategic and transactional operations can be easily outsourced. Services such as creating purchase orders, supporting pure transactional PR, reporting, data cleaning, and vendor management are some examples of tasks that can be outsourced.

Outsourcing can be especially beneficial when a company lacks expertise in a specific area. By hiring external consultants or outsourcing companies, a company can gain access to specialized expertise and support in creating procurement strategies or implementing instruments such as Supplier Relationship Management (SRM). This long-term partnership helps companies improve their qualifications, expertise, and cost-saving initiatives.

But where can you outsource these functions? The good news is that service centers are available in various locations worldwide, including Romania, Hungary, India, the Philippines, and more. Procurement directors and supply chain officers may have concerns about data protection when outsourcing. However, as remote work becomes more prevalent, it is possible to organize data protection and ensure IT security measures are in place to protect sensitive information.

In terms of the value that can be derived from outsourcing, the focus should be on driving value and increasing expertise in strategic areas. Non-value adding functions or activities can easily be outsourced to agencies or external experts. It is important to prioritize outsourcing transactions that do not bring significant value, such as tail spend, operations PRPO, reporting, and data management.

For procurement officers and directors looking to outsource, the question remains: where can they find the right experts? Apart from contacting supply chain consulting agencies like SCMDOJO, there are other ways to find experts in the field. Conducting a thorough analysis of your ABC and conducting a BBC analysis can help identify transactions that do not bring substantial value. Additionally, operations PRPO and reporting can be outsourced by connecting with accounts payable. Lastly, data management can also be outsourced to companies specializing in this area.

In conclusion, the outsourcing of the procurement function is not only possible but also a strategic move that can enhance efficiency and expertise in the supply chain. By dividing the procurement process into smaller parts, companies can determine which aspects can be outsourced. Outsourcing non-strategic and transactional operations, connecting with accounts payable, and outsourcing data management are just a few examples of how companies can benefit from outsourcing. With proper data protection measures in place, companies can confidently outsource tasks to external experts and focus on driving value in their procurement functions.

We hope you found this information valuable. Make sure to like, share, and subscribe to our channel for more insightful videos on supply chain management. Keep it simple and keep it real!

Keywords: purchasing outsourcing companies, procurement function, outsourcing, supply chain, standard processes, specialized workflows, demand forecasting, ERP data cleanup, transactions, expertise, consultants, strategy, SRM, data protection, data management, value, ABC analysis, tail spend, operations PRPO, reporting, experts.

Leave a Comment