Keeping your eye on your business goals is critical to success. Remaining focused on your core business requires engagement in every area from the supplier network to customer delivery. But what is it costing to keep this focus in your supplier network. Probably more than you think. Procurement outsourcing is a solution that allows companies to stay focused while addressing non-strategic areas without adding additional costs.
Outsourcing has survived so long in the business world because it simply adds value. Outsourcing has been used by IT for decades and payroll demands have helped create giants such as ADP. Procurement outsourcing is capable of adding similar value to any organization and is now beginning to find wider acceptance.
Here are 3 key reasons why companies should consider procurement outsourcing as a strategic solution to their operations:
1. Cost reduction
It is very expensive to hire talented people and keep them in house. Procurement is a very demanding business function and talent is getting to be in short supply driving up the costs. Salaries, benefits, training, insurance, office space and equipment are all requirements that add costs to your overhead and must be factored into your cost structure. It is important to hire strategic help that fits your core business model. Procurement outsourcing allows companies to address non- strategic elements of the business much more cost effectively.
2. Risk mitigation
The business environment today can be very choppy, up one day and down the next. Most companies have learned to adapt since the Great Recession by keeping staff very lean and adding new employees only as a last resort. When business is a little soft, the exposure to higher cost is very risky. Layoffs have become a normal part of business operations, but scaling the organization up and down comes at a cost. Payouts for terminations, recruiting new talent and training are significant costs to businesses having to deal with natural peaks and valleys of business cycles. Procurement outsourcing mitigates this risk but allowing companies to tap into talent on demand and yet keeping the agility to remain scalable to any project.
Choosing procurement outsourcing allows you tap into expertise that was never possible when relying on in house talent alone. We all have to pick and choose our battles and your core business is certainly worth protecting. But that leaves a lot of areas outside of your core business. Now that the baby boomer generation is retiring, they are taking with them decades of experience. Companies will be forced to deal with this change in talent level one way or another. They will have to choose wisely where to engage their limited resources. Procurement teams will be asked to handle many demands outside of their core business with less experienced people? It can be like bringing a knife to a gunfight when trying to negotiate contracts out of your expertise. It sure is nice to have an expert on your side of the table.
Outsourcing is a proven business model that is finding a new application in the procurement world that can add value across many areas of your business. Is it time for your business to be ahead of the wave or behind it?
If you or anyone you know would like to learn more about how procurement outsourcing solutions can help your business be more competitive please email me for a free no cost assessment.
Question: Does your company’s lack of procurement support either now or in the future concern you? Please feel free to comment.