60% of firms shun outsourcing

16 January 2008
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16 January 2008

Most companies have no plans to outsource their purchasing in the next two years.

According to a survey of more than 260 firms by the Aberdeen Group, 60 per cent will keep buying in-house.

"Although leveraging external expertise is now more widely accepted within the procurement community, there is still hesitation to fully commit to procurement outsourcing as a leading strategy," said the report.

According to the survey, the most common reason for not outsourcing was that purchasing is a core competency of the business. Other firms believe they already have the systems in place to drive savings and successful procurement.

But the research firm added the market was now reaching a tipping point, with 27 per cent of firms currently outsourcing, and a further 13 per cent planning to outsource part or all of their procurement function in the next two years.

Of those looking to outsource, only 10 per cent intend to do so fully and straight away, with 23 per cent aiming to do it in a step-by-step by process, 22 per cent by category, and 45 per cent with a combination of the two.

Cost savings, either through improved deals with suppliers, or lower running costs in procurement, were the two benefits that firms most expected outsourcing to bring.

And 45 per cent of buying chiefs thought reducing the number of people in procurement departments, as a result of outsourcing jobs, was a positive strategic benefit. "Conducting business with fewer full-time equivalencies allows procurement groups to become more nimble and able to quickly adapt to constantly changing supply markets," the report said. The report's author, Bill Browning, told SM this would be more common among medium-to-small sized companies.

Pressure to reduce costs was the main reason for outsourced buying, cited by 45 per cent of firms.



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