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When it comes to handling procurement, businesses often face a critical decision: should they manage it in-house or outsource it?
While it is possible to handle your procurement in-house, the idea of outsourcing it seems to be a better option and it has turned out to be so for businesses that outsource their procurement to us here at SARA.
With our years of experience in the procurement industry, we have observed the results of outsourcing the procurement of business needs; You will find all the common benefits, and challenges faced when procurement is outsourced and our advice on when outsourcing procurement is the best business move; all in this article.
Want to outsource your business procurement needs to the best agents? Contact us today and we will settle that.
What is Procurement Outsourcing?
Procurement outsourcing is the transfer of specified key procurement activities in a business to a third-party procurement expert. For some businesses, this means delegating a few specific activities in the procurement process to an agent, while for others, they delegate the entire procurement process.
When Should You Outsource Procurement?
We advise businesses to outsource their procurement when they can see the following indicators in their operations:
- High costs related to procurement operations, including personnel, technology, and logistics.
- Inadequate in-house expertise and knowledge.
- Fluctuating procurement needs; high today, low tomorrow.
- Persistent inefficiencies, such as delayed orders, stockouts, or overstock situations.
- Challenges in managing procurement risks.
- Slow procurement cycles that hinder your ability to respond quickly to market changes.
When any of the following is an issue you and the procurement team face regularly, then bringing in a procurement expert from our team at SARA Procurement Services is the best business decision that can lead to an efficient supply chain for your business.
Benefits of Outsourcing in Procurement
It is okay to handle procurement activities at the house, especially with slight or minor procurement; however, outsourcing procurement to experts has its benefits, which are:
1. Cost Reduction:
According to available data, companies that outsource certain procurement functions can typically expect an operating cost reduction of 15 to 20%. This is so because they no longer need to invest in procurement equipment and technologies which are often capital-intensive.
Aside from operations cost savings, another cost-intensive aspect of a business that benefits from outsourcing is labour cost. This includes expenses related to salaries, allowances, compensations, and health maintenance.
By outsourcing procurement, you can reduce the number of personnel needed in your in-house procurement team, leading to substantial savings in labour costs.
A good procurement expect can also help you identify various opportunities to optimise your procurement process and make it cost-effective.
At SARA we do this by:
- Negotiating better terms with suppliers, and securing discounts for bulk purchases or long-term contracts.
- Identifying and sourcing from alternative suppliers in different geographical locations where production costs are lower.
- Eliminating redundant procurement steps and automating routine tasks.
- Coordinating bulk buying across different departments
- Optimising inventory levels to avoid overstocking and stockouts
2. Improved business management and operational efficiency:
Focusing on business processes like procurement can take up a massive chunk of your time as you have to look for a good supplier, check products’ quality, handle logistics management, etc. All these can distract you from your core business functions and goals.
When certain purchasing functions and services are outsourced to external vendors, your focus can then be shifted to other important aspects of the business that align with the company’s core goals and vision, thereby enhancing efficiency and productivity.
Outsourcing non-core areas of the company, like procurement or IT, will give you the time to concentrate more on meaningful work that will significantly impact your business operations.
Also, using the services of an independent contractor gives the business access to experience and expertise that will improve business functions and efficiency while introducing new initiatives.
3. Access to resources and facilities:
Partnering with a third party opens a business up to high-end procurement resources and facilities they would have access to. It also gives them access to discounts and better contract negotiation and opens them up to a more comprehensive network of suppliers in partnership with the procurement expert.
Outsourcing gives you access to category experts who can offer procurement advice and have a more comprehensive supplier portfolio that can help accomplish your goals.
4. Flexible Scaling Of Operations:
With growth in any business comes the need to scale the teams, technology, operations and other core business activities. Scaling your procurement operation is easier and cost-effective when you working with external procurement experts as they have access to the necessary resources to fulfil the increase in demand.
For businesses with fluctuating procurement needs, scaling up in a season of high demand and scaling down in a season of low demand is effective when procurement is outsourced.
5. Competitive Edge:
Outsourcing can give small businesses a competitive edge in the market. By partnering with external experts, small businesses can access procurement resources globally, giving them an edge over other companies in their category.
With this, they will be more experienced and can even offer quality products and services to clients at a cheaper rate.
What Can You Outsource in the Procurement Process?
Here are some of the procurement activities that we can help you handle as your procurement partner:
- Strategic product sourcing globally,
- Contract negotiations and management,
- Procurement planning,
- Supplier relationship management,
- RFP/bid management,
- Spend analysis and management,
- Risk Management,
- Quality Assurance,
- Logistics,
- Inventory Management, and,
- Procurement Training and Support.
The following, and more, are the procurement activities you can outsource to our experts and spend your time on what matters most in your business process and operation.
Challenges Faced in Procurement Outsourcing and How We Help You Overcome Them
1. Communication Issues:
Communication is key in every business relationship as it prevents misunderstandings or disagreements from arising but this communication is lacking in many business relationships with their procurement expert and this is an issue.
This communication issue can lead to a loss of control over the procurement lifecycle of your business, which should be avoided.
How We Handle Communication Issues At SARA:
A. We implement clear communication channels between us and your business. This is mainly on WhatsApp.
B. Schedule regular meetings, feedback sessions and check-ins to discuss ongoing projects and maintain continuous engagement.
C. We have specific points of contact that you can reach out to at any time.
D. We leverage collaborative tools to facilitate real-time communication where necessary.
2. Quality Concerns:
Even after having an agreement with the procurement expert on the quality of the product you want for your business, would they really care about it just as you would?
Do procurement experts care about my business brand reputation?
These are the concerns that arise from outsourcing procurement and it is fine to have these concerns and ensure that the goods or products procured by the agent meet your business standards.
How We Handle Quality Concerns At SARA:
A. We work with you to define explicit quality standards and specifications for all your procurement needs.
B. We implement rigorous supplier vetting to get the best products.
C. Conduct regular quality audits and random product testing.
3. Compliance And Risk Management:
In every industry, there are procurement laws and regulations that need to be adhered to. Working with a procurement agent with little to no knowledge of these regulations means you risk compliance.
This challenge goes beyond concerns with regulation to include other procurement risks like shipping delays, customs seizure, damage during transit, inadequate warehousing and human errors.
How We Handle Compliance And Risk Management At SARA:
A. Our experts ensure all legal compliance risk management requirements are documented so all are taken care of properly.
B. We regularly perform internal audits and risk assessments.
C. We also ensure we have updated relevant industry certifications and licences.
You can read this blog to see our strategies for mitigating major procurement risks.
Work with SARA To Procure Your Business Needs.
Yes, you can gain a lot of business advantages from outsourcing your procurement to a procurement agent/agency. But you need to ensure that you are handing over this crucial process in your business to good hands.
At SARA, our team of experts have about 20+ years of experience working with businesses globally to procure goods from anywhere in the world, conduct quality assurance, arrange shipping and logistics and more.
You can outsource your procurement to SARA Procurement Service today and leverage our resources and expertise to benefit your business.
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