Procurement Outsourcing

What Is Procurement Outsourcing Services? Procurement Outsourcing is the process whereby a company engages an external service provider to manage their entire core or non-core purchase transactions or spends thereby freeing its important and key resources to work on strategic initiatives and handling important business activities. Outsourcing is also important activity which helps companies to replace costly headcount positions with low cost resources of third party service provider for handling non core activities and in turn realizing huge savings.

Holistic Sourcing and Procurement Approach:

We have developed a holistic approach to sourcing and procurement that combines strategy, governance, and execution to drive benefits and improve solutions. A key tenet of our strategy is balancing direct savings initiatives with building world-class, sustainable procurement capabilities within a company's procurement processes, organizational structures, and technology solutions. It is not enough to drive one-time savings. It is more important to establish effective capabilities, solutions, and sourcing services within a procurement team to achieve continual savings and decrease direct and indirect spending.

In today's turbulent economic times each procurement head has mandate to focus on cost optimization initiatives, keeping quality of products intact or rather making it better. The procurement function has been elevated to a strategic component of value creation and a rich source of competitive advantage. To achieve this, rather than creating a world class procurement capability in-house, many companies have simply outsourced it. Procurement outsourcing is often undertaken to leverage economies of scale and improve the execution and control of underperforming or non-core tasks and poorly managed spend categories. In doing so companies can realize reduced supply and operational costs, improved compliance and enhanced performance and cycle times.

Procurement outsourcing constitutes a growing dimension of corporate procurement strategy. To date, procurement outsourcing has mostly been limited to the transactional purchase-to-pay and advance-payment processes rather than the more strategic aspects of procurement. However, research by World Gate Ltd. Benin, a leading African strategy and operations consulting firm, indicates that major companies will likely expand the scope of procurement outsourcing in the coming years. If procurement outsourcing is to yield the expected benefits, its adopters will need to carefully weigh the comparative costs and risks of insourcing and outsourcing across specific procurement activities, manage the potential risks, and ensure that sufficient effort goes into process design and optimization.

Procurement Outsourcing Cost and Risk Assessment:

To assess the potential for procurement outsourcing across specific procurement activities, it's helpful to think in terms of a simple cost-risk matrix. The X-axis gauges the cost of outsourcing the procurement activity relative to performing it in house, and arrays activities from low cost across to high cost. The Y-axis measures the risk associated with non-performance or incorrect performance of the procurement activity, and arrays activities from low risk up to high risk.

Procurement activities that fall in the low cost, low risk area of the matrix – such as purchase order (PO) processing and accounts payable – are clear candidates for procurement outsourcing. Activities that have high risks attached to non-performance, such as supplier scheduling, are candidates for procurement outsourcing only if risks can be well managed through information sharing and carefully structured service level agreements (SLAs). Meanwhile, activities for which the costs of procurement outsourcing are not less than doing them in house – which may be the case for large companies that can achieve internal economies of scale – may still be outsourcing candidates in situations when the company would benefit from trading capital expenditure for variable costs, or when there is a benefit in the company being able to redirect its time and attention away from operational activities and toward more strategic concerns.

The World Gate Ltd. Benin Can Help You Assess, Plan, and Implement Procurement Outsourcing:

We offers procurement advisory programs and procurement outsourcing consulting services that drive measurable improvements in our clients' operational efficiency and effectiveness. Our procurement outsourcing consulting, like all of our general and administrative (G&A) strategy and operations consulting, is informed by our renowned benchmarking and best practices repository built on more than 13,200 benchmarking engagements with the world's leading companies. Leveraging rich empirical data and years of hands-on experience, The World Gate Ltd. Benin's veteran advisors can help you with all aspects of procurement strategy development and implementation, including benchmarking of your current operations; evaluation of organizational options such as shared services, outsourcing, or offshoring; supply chain strategy formation; business process reengineering; and talent management for the procurement function.

To learn more about The World Gate Ltd. Benin's procurement outsourcing consulting services, as well as our services in other back-office areas such as HR strategy, IT strategy and so much more, contact us.