Procurement to outsource more

29 September 2010

29 September | Lindsay Clark

Purchasing departments are set to see a wave of outsourcing as they struggle to focus on higher-value activities within their organisation.

Chris Sawchuk, global procurement practice leader at consultancy and benchmarking firm The Hackett Group, said buying teams had so far under-used external expertise and services relative to other business support departments.

Addressing delegates at the eWorld Purchasing & Supply Conference in London yesterday, he said: “In procurement departments we outsource two to three per cent of our total activity to a third party, that is minuscule compared with our functional peers. When you look at finance, IT or HR you are looking at 10 to 30 per cent of the overall cost being done by a third party. We have not even scratched the surface yet.”

Sawchuk said this was going to change in the future, with a greater proportion of procurement activity outsourced. A drive towards greater business agility in response to uncertainty in the global economy was making procurement consider more outsourcing, he said. “It has never been about cost for procurement, we’re a peanut compared with the rest of the functions.”

Outsourcing gives procurement teams the opportunity to focus on activities that are more strategic to the business and jettison day-to-day activity. Non-strategic sourcing and market intelligence offered good opportunities for outsourcing, Sawchuk added.

“We are outsourcing because there are things we would like to be spending more time on. People have improved the talent of their organisations. How are we going to go after the stuff that may drive more value towards our organisations? The folks that remain [after outsourcing] are going to have a lot more opportunities to do new stuff and find other ways of doing the things we had been doing,” he said.

This would “allow my high-price talent to go after more strategic and challenging areas”, Sawchuk said. This included value management and demand management.

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