Before stepping into Outsourcing Strategic Procurement, it is very important to know the true Colours and long-term benefits of using a third party for procurement outsourcing. 

In the last two decades, business process outsourcing has changed the structure of many organizations. Commonly, the companies outsource their routine tasks, activities processes, services, sales, or operations to a third party.

The BPO industry is more involved in offering an even broader range of services. These include strategically important ones mainly manufacturing or R&D.

Each stage of the procurement cycle involves multiple stakeholders, variable processes, various departmental goals and objectives, and copious amounts of administration. Any value, initially attached to a transaction or contract can be systematically eroded from the business. This occurs as the process grinds slowly and painfully onwards to an unsatisfying conclusion. But indirect procurement outsourcing will ensure the value not only sustains but flourishes.

Procurement outsourcing mainly involves a growing trend of corporate procurement strategies

The best way to create a thorough procurement outsourcing department can involve:

1. Access scales and capabilities they don't have in-house enact long-term changes.

2. Collaborations, as well as flexible outsourced business agreements based on trust transparency, and fairness. The focus on value creation and cost reduction will naturally follow (it's a win-win scenario).

3. Buying power and volume aggregation are achievable. The marketing department can utilize aspects if they know about it through partnerships. Business outsourcing indirectly frees up the time for direct procurement to optimize their strategically critical activities.

Corporate social responsibility (CSR) is easier when you are reviewing.

The most important point to be noted is delivering cost reduction efficiencies and value through robust outsourced indirect procurement.

The outsourcing of strategic procurement activities like supplier selection, contract negotiation, or specification management becomes wider.

Procurement outsourcing can span several activities from strategic to transactional.

Strategic sourcing: 

It is the process of developing channels of supply at the lowest total cost, not just the lowest purchase price. Strategic sourcing expands upon traditional organizational purchasing activities to embrace all activities within the procurement cycle. These range from specification to receipt, payment for goods and services to sourcing production lines where the labor market would increase firms' ROI. Strategic sourcing processes aim for continuous improvement and re-evaluation of the purchasing activities of an organization.

Strategic and transactional procurement activities differ. Transactional procurement consists of routine actions such as material requirements planning, invoices, and documentation. While these are important, they are minimal in comparison to the value that strategic procurement adds to a business’s processes. Strategic procurement focuses more on the analytical aspect of a business operation, which in the long run, adds more value. A business needs to analyze the material requirements, sources that were selected, the relations with vendors, and the expenses.

Transaction processing is information processing in computer science that is divided into individual, indivisible operations called transactions. Each transaction must succeed or fail as a complete unit; it can never be only partially complete

Transaction processing systems consist of computer hardware and software hosting of a transaction-oriented application that performs the routine transactions necessary to conduct business. For example, systems that manage sales order entry, airline reservations, payroll, employee records, manufacturing, and shipping.

 

Strategic sourcing activities

 

Demand and specification management

Specification development

Policies processes development and implementation

Change management

 

Strategic sourcing

Developing and implementing category strategy

Supplier selection

RFx

Negotiations

Contracting

 

Supplier management

Supplier performance management

Contract management

Supplier relationship management

Supplier development

 

Sourcing support

Spend analytics

Market analysis

Supplier profiling

Contract administration

Risk management

Spot buy

Auction support

 

Transactional procure to pay activities

Operational purchasing

Requisition processing

Purchase orders processing

Material and services receipt recording

 

Procurement admin

Performance monitoring (supplier finance)

Compliance monitoring (policies, contracts)

Reporting

 

 Accounts Payable processing

Supplier Masterfile setup and administration

Invoice processing and bill payment

Bill auditing

Time and expense auditing

 

Technology and support system

Help desk

catalog management

E-procurement

Solution hosting

 

Most of the time a lack of understanding results in incomplete deeds, wrong activities, and fewer incentives. Companies may pick the wrong partners that fail to ensure sustainable long-term savings.

To make strategic procurement outsourcing a success the company needs to take a highly systematic approach with three basic steps. 

 

Strategic buying only in categories.

Precise understanding of the sources, their value, and how to unlock them.

Choose an outsourcing partner that is capable to address the source of value and defined the agreement that maximizes the chance of capturing potential savings

High-level approach for a strategic segment of categories

 

High- build on capabilities

Medium- build own capabilities or consider outsourcing

Low- Consider outsourcing

 

Ability to successfully manage categories in house:

Market leverage

Spend size

Sourcing frequency

 

Resources

Capacity

(full-time equivalents)

Expertise

 

Some categories may be a distinctive source of competitive advantage for the company, or such significance to quality requirements or customer value proposition that outsourcing them would create unacceptable risks to the business.