SCDigest
Editorial Staff
SCDigest Says: |
Based on the survey data, the report predicts that the PO market will grow by 37% in 2008, with a very bright future ahead of it for years to come.
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Procurement functions represent one of the most rapid areas of outsourcing growth, with that rapid growth expected to continue strongly for 2008 and beyond. So say Scott Wilson and Doug Brown, authors of the popular book The Black Book of Outsourcing, and founders of consulting firm Brown & Wilson Advisors.
Again for this year, Wilson and Brown have completed a report specifically on the state of procurement outsourcing (The Black Book of Procurement Outsourcing), based on survey data from a large respondent pool of more than 3500 procurement and supply chain executives and managers from across the globe.
What is Procurement Outsourcing?
Brown and Wilson define it as follows: “Procurement Outsourcing (PO) involves the outsourcing of parts or all of a company's procurement functions (people, processes, systems, and expenditures) to an external service provider. Today, the procurement BPO focus is on indirect (non-core) procurement. Procurement outsourcing typically includes many of the traditional IT outsourcing elements - systems integration, transition, change management, service level agreements (SLAs), and governance.”
Based on the survey data, the report predicts that the PO market will grow by 37% in 2008, with a very bright future ahead of it for years to come.
Why? Because procurement has an advantage over most other forms of outsourcing. In addition to allowing a company to focus on core competencies, reduce fixed costs, and other benefits of outsourcing generally, one promise of procurement outsourcing is that it can potentially reduce the cost of procured goods as well by leveraging the outsourcer’s buying power, technology, expertise and other skills.
“By virtue of the quick pay-back period associated with procurement outsourcing, the value proposition for these initiatives is fairly compelling to prospective buyers,” say the authors.
So far, most procurement outsourcing contracts have focused on indirect procurement – goods and services needed for running the company generally (office supplies, maintenance items, light bulbs, janitorial services, etc.), not direct materials used for manufacturing or resale.
“One of the important payoffs realized by PO adopters is the opportunity of utilization of top-notch procurement systems and processes without making huge capital investments,” the authors say. “Procurement outsourcing as a strategy works well for companies who constantly battle with the nonconformist buying issues despite having made considerably large investments in strategic sourcing and e-procurement in the form of time and money.”
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and Procurement Article - Continued Below)
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