Procurement outsourcing takes lead

Corporations that practise procurement outsourcing have realised rapid operational and financial gains, an Aberdeen Group analysis has suggested.

The market research firm found, in a survey of 750 senior executives, that much of the drive to outsource spending and procurement came from recent economic pressures.

'Enterprises spend nearly half of every dollar earned on external goods and services,' said Tim Minahan, the author of the report and vice-president of supply chain research at Aberdeen, in a statement.

'Many enterprises are transferring sub-optimal procurement processes and poorly controlled spending categories to procurement service providers that offer economics of scale, category expertise and operational and technology infrastructure that many firms lack.'

Minahan said that procurement outsourcing often led to other outsourcing activities. Once corporations got their feet wet in procurement outsourcing they were more open to outsourcing other areas of their businesses.

Enterprise executives increasingly believed that procurement outsourcing could cut procurement cycles in half, he added.

Minahan claimed that procurement outsourcing could also produce 18 percent cheaper prices for goods and services and improve contract compliance by more than 50 percent.
The report also claimed that procurement administration and automation costs were cut by more than 25 percent.

Minahan said the report revealed that 43 percent of enterprises outsourced to some degree, with larger corporations also outsourcing added enterprise functions.

'The value derived from procurement outsourcing is determined largely by the structure and maturity of an enterprise's procurement operating model--not its industry or company size,' Minahan said.