Procurement outsourcing on the up

14 March 2006
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14 March 2006 | Rebecca Ellinor

Most companies are either using external providers to broaden their procurement capabilities or are considering the use of third parties according to the Economist Intelligence Unit (EIU).

The global online survey quizzed 180 managers, including senior financial staff, purchasing executives and board members. Just over half of the respondents already use outsourced procurement services or are willing to consider using them.

Six in 10 thought outsourcing procurement leads to improved processes, category expertise and service levels. More than 50 per cent said it would increase net income. Further, 50 per cent said third parties could achieve savings more quickly than internal practitioners.

On the downside, many are concerned about loss of control. Just over half fear working through a third-party provider could be awkward in the event of a problem with a supplier or a transaction. Just under 50 per cent think it could threaten the position of managers used to exerting total control over indirect expenses.

Respondents said they prefer to keep some procurement activities in-house and transfer others to third-party providers. The majority expect the use of outsourced procurement to grow in 2006 as a result of the pressure to cut costs.

The research found the areas most likely to be outsourced are indirect spend categories such as office supplies, travel, temporary labour, printing services and facilities management. Transaction processes - such as requisition, ordering, invoicing and payment - are also likely to be outsourced, it found.


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