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Procurement Outsourcing

By 27th March 2013March 16th, 2022No Comments

Most companies outsource.

  • New member of staff? Recruitment Consultant or Agency
  • Legal advice? Solicitor
  • Financial advice? Accountant
  • Marketing advice? Marketing Consultant

But why outsource? Why not do it in-house? Consider the benefits of outsourcing:

  • Immediate access to specialist knowledge and expertise
  • No direct employment costs – salary, NI, holiday pay, employee benefits, pension costs, absence cover etc
  • Flexible cost options on an ‘as-needs’ basis
  • Huge time savings – concentrate on running the core business activity

Think about your business. What does it do best? Presumably you concentrate on how you can be the best ‘widget’ provider locally, nationally or internationally. But to be the best ‘widget’ provider, the whole needs to the sum of the very best parts. You need to have the best sales team, production team, financial team, marketing team etc.

You can justify employing some of these people directly because they will spend their whole time developing and refining the company’s offering. But when you need advice on employment contracts, do you turn to your ‘employment contract person’? When you need a new website, do you sit down with your full-time, in-house website designer? Probably not, because you cannot justify employing them in full-time positions.

The principle of  procurement outsourcing is exactly the same. You probably employ one or more people in a ‘Purchasing Department’. Because the company is (hopefully!) successful, they are probably very good at procuring the essential components involved in widget manufacture. But what about the more than 80 odd other categories of expenditure that feature in the nominal ledger – stationery, packaging, waste, electricity, mobiles, vehicle costs, insurances, water, print etc etc. Does your Purchasing Department have the individual specialist knowledge to procure ALL these items? The answer is likely to be no because these are all industries exactly like the widget industry – complex with many suppliers, good and bad. That is where the benefits of outsourcing to people who do have the experience, knowledge and expertise of these other industries in one consultancy can pay instant dividends.

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