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Categories, Benefits and Scope of Procurement Outsourcing in Businesses Today


Procurement outsourcing essentially means appointing a third-party organisation for all procurement-related processes, partially or wholly. Organisations that cater to the requisites of the entire gamut of procurement of a business are called outsourced procurement organisations.

Procurement outsourcing has been tumefying in the last few years, considering the emergence of a fast-paced, dynamic competitive landscape. Outsourcing procurement has proven itself to be immensely propitious for organisations as it cuts down the unnecessary hassles of evaluating the best options across various criteria, such as assessment of suppliers, enlisting products, documentation, etc.

Why Do Companies Outsource their Procurement?

There could be a plethora of reasons for organisations to shoot in for outsourcing their procurement spectrum. Some could side with the quick turnaround time, while others could proffer the benefit of error-free and concrete procedural alignment of procurement.

  • Lack of Procurement Resource in an Organisation: Procurement outsourcing certainly truncates the unnecessary aberration that comes along. Hence, organisations that don't have an exhaustive and throughgoing procurement department should bank on a third party given their expertise. 
  • Product-Specific Requirement: Quite often, the incidence of procurement outsourcing germinates due to an ineptness for a particular product or raw materials required for a furnished entity an organisation produces. In simpler words, there is a high probability that despite having a sturdy team for procurement, some product categories might need expert assistance. Hence, outsourcing of procurement rolls out in this scenario. 
  • Emergency Deals: Sometimes, businesses might have a critical requirement for a product owing to a good deal that needs to be closed quickly or for the personal endeavours of an organisation. In this case, energy and time dissipation in procurement can't be risked. Hence the need for procurement outsourcing is emboldened.

Categories of Procurement Outsourcing

Procurement outsourcing can be grouped into two different categories-

  • Direct Procurement
  • Indirect Procurement

Direct Procurement - Direct procurement in procurement outsourcing implies the products that directly influence an organisation's core business. It includes raw materials, ingredients, and essential requirements for a furnished product. It is quite vital to the growth of an organisation considering its direct implications. Also, it is more common than indirect procurement.

Indirect Procurement - Indirect procurement comprises the procurement process that caters to indirect materials that are not-so-core to the business needs. It includes materials that tend to help and substantiate the core products but don't directly tinker with the core trajectory of the product or the business. For example, technology and innovation from a third-party vendor/organisation.

Merits of Procurement Outsourcing

Procurement outsourcing comes with immense benefits. The procurement process becomes much simpler and more efficacious with focused attention on all the steps and sub-steps. Some of the benefits are listed below:

Cost Effectiveness: Outsourcing the procurement process can save a lot of cost concerning the best and the most economical options in the market. With a dedicated team, finding and listing the best suppliers and products with the best price range becomes far easier. Hence, the problem of limited suppliers and compromised choices is extirpated through procurement outsourcing.

Refined Operations: With a better team to look after the processes related to procurement, every detail is efficiently dealt with. It makes the process easier and the operations better. Hence, the overall goal of the business is efficiently met without squandering time, money, and energy.
No Errors in the Documentation and Less Trouble: Maintenance of documents and legal formalities might not be easy to look after by an in-house team. Especially if the workforce is lower, the hassle becomes more bothersome. Hence with a team to look after the formalities efficiently and correctly, it gets superbly easy to carry out the workflow without having to get entwined in the clauses and terms.

More Room for Innovation and Technology: It might get difficult for an organisation to leverage the strides of technology and innovation with an in-house team. Partnering with third-party organisations in procurement could open the room for the latest technologies being used in the world. Not only does this make the process easier, but it also adds to the techno-repertoire of an organisation to help it in the future. Therefore, keeping it abreast of all the developments.

About Author:

Prakhar Panchbhaiya

Senior Content Writer at Procurement Resource

Prakhar Panchbhaiya is an accomplished content writer and market research analyst. With over 4 years of experience in content creation and market analysis encompassing many industries, including pharmaceuticals, nutraceuticals, biochemistry, healthcare, ed-tech, and Food & Agriculture, he has been creating quality content for multiple sectors. He is a Biochemistry major with sturdy backing in a PG diploma in digital marketing, helping in the exhaustive content creation based on extensive research and competitive marketing.




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