Is there a future of outsourced procurement?

Intense global competition and difficult economic times have a significant impact on the financial activity of the company. According to the IBM article, Smart spending (a new approach that can help you optimize your procurement spend): “nowadays the business focuses on its own core activities more than ever and, besides, it regulates the financial flows of the organization very accurately. It is clear, that organizations can’t but carry out a detailed study of the procurement costs from suppliers, and sometimes these levels are equivalent to half of the annual income of the organization. Since the pressure increase is inevitable, companies want to ensure optimal return on the procurement costs and the ability to find positive competitive sides.

In Russian-speaking countries, and in the ex-USSR nations, the concept of “outsourcing” is strange and new. However, the world does not stand still and has been developing in this direction for a long time. If you translate the term “outsourcing” literally, it means providing services outside the company or making the delivery. In the countries of the former Soviet Union, there is still a way according to which, everything in the company (holding, complexes or other structures) is done on their own. That is, companies have their own kindergartens, dining halls, carports or hog-raising farms for meat production for their kitchens and kindergartens; and moreover, these companies will also self-sow crops on the fields, to say nothing, that any services are also provided by themselves (recruitment, cleaning, etc.)

During the last decade, a tendency to get rid of this economy and go to outsourcing, has appeared.

But still, based on our mentality, we don’t implement the new technology and approaches fully, which, of course, enables us to become more competitive. The most popular prejudice about outsourcing is that “if I do it myself – I’ll do it well, but if others will do that, everything will be spoiled and you’ll have to redo it. However, there are plenty of successful, effective examples and cases that affect the opinions of the skeptics.

The following directions of outsourcing are now well-known and popular:

– Outsourcing of any business processes;

– Outsourcing of HR management, including outstaffing;

– Production outsourcing;

– IT-outsourcing;

– Marketing and advertising services outsourcing.

Such types of businesses have already successfully entrenched in our lives.

So why do we need outsourcing in business? According to the results of surveys and analyses, it is actually needed. Under the conditions of high competition, it is necessary for businesses to increase their competitiveness through the optimization of all processes and to concentrate on their core activities. But their ballast should be sent to outsourcing, optimized and automated. Otherwise, it will not allow them to develop and will pull them down.

We also need to understand what outsourcing of procurement means, in which circumstances it can be the most effective, as well as, to find out its pros and cons.

As Wikipedia says, the outsourcing of procurement processes (procurement) is sending the main activities of management, tendering and procurement to the third-party organizations that are specialized in providing professional services in the fields of procurement.