Business strategy to optimize company support functions

The procurement outsourcing strategy is an approach that consists in entrusting certain activities related to procurement to specialized external service providers. This approach aims to allow the company to focus on its strategic activities while optimizing its purchasing function.

Procurement Outsourcing: Cost Reduction, Expanded Expertise and Identified Opportunities

Outsourcing procurement offers numerous advantages. First of all, it makes it possible to reduce costs by using the skills and resources of specialized providers. The latter can benefit from economies of scale and better negotiations with suppliers, which results in lower prices for the business. In addition, outsourcing procurement allows you to benefit from expertise and knowledge of the wider market. External providers often have a better overview of suppliers and market trends, which can help the business make more informed decisions and identify new opportunities.

Risk Management in Procurement Outsourcing: Essential Monitoring, Control and Coordination

Risk management is also an important aspect of the procurement outsourcing strategy. External service providers can help minimize procurement risks by implementing rigorous monitoring and control mechanisms. They can also contribute to the management of disputes and supplier relationships. As part of the procurement outsourcing strategy, it is necessary to establish good coordination between the company and external service providers.

The Procurement Outsourcing Strategy

We may think that purchases only concern the main activities of the company, but we forget that a large part of the purchases made in business do not directly concern the business. Indeed, there are different categories of purchases:

• Class A purchases: These are strategic production purchases
• Class B purchases: These are recurring and strategic purchases excluding productions
• Class C purchases: These are non-recurring and non-strategic purchases

Class C purchases are purchases that are not related to the company's direct business. For example, for a car dealership, the purchase of office equipment, supplies or even hygiene products does not fall within the company's strategic purchasing category. On the other hand, although underestimated, Class C purchases have a direct impact on the margin achieved by businesses. They represent, of course, only 5% of business costs, but what about so-called “hidden” costs, also called indirect costs.

These costs include: deliveries, the number of suppliers created, purchases outside the process, errors, returns, the management time spent on these purchases, etc. In addition, we note, after studies carried out with various companies, that these purchases represent on average 60% of the order volume, 75% of the number of suppliers and 85% of the number of items in the company.

All these accumulated expenses are a real obstacle to the performance and development of the company. On the other hand, they are often managed by qualified employees who could put this time to good use in managing strategic purchases where their skills as buyers are the most important.

Thus, so-called class C purchases must be included in the company's procurement outsourcing strategy.

Class C Purchasing Outsourcing

The Class C procurement outsourcing strategy saves the purchasing department time, which means saving money for the business.

Because the problem with these “wild” purchases is the excess number of supplier accounts created for purchases that will often only be made once. This creation of supplier accounts is therefore a waste of time and prevents the buyer from carrying out missions with greater added value for the company.

Successful Procurement Outsourcing: Communication, Role Definition and Strategic Analysis

Effective communication, a clear delineation of roles and responsibilities, and regular follow-up are essential to ensure the success of this approach. It's also worth mentioning that procurement outsourcing should not be considered a one-size-fits-all solution for all businesses. The decision to outsource certain purchasing activities should be based on a thorough analysis of the company's situation, its specific needs and its strategic objectives.

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Options for Implementing the Procurement Outsourcing Strategy: From Supplier Panel to Selective Purchasing

The procurement outsourcing strategy can be implemented in a variety of ways. Some businesses outsource their entire procurement function, while others prefer to outsource specific areas, such as indirect procurement or non-production procurement. It is also possible to set up a panel of external suppliers to meet the specific needs of the company.

The Procurement Outsourcing Strategy: Cost Optimization and Essential Coordination

The procurement outsourcing strategy is an approach that allows the company to focus on its strategic activities while benefiting from the skills and resources of external service providers. This reduces costs, optimizes purchasing processes, and minimizes procurement risks. However, it is important to establish good coordination and effective communication to ensure the success of this approach.