Outsourcing is a growing trend in procurement as it has ample benefits for organisations, but the risks involved are also putting many off taking the leap.

The question that remains for many is ‘do the benefits of outsourcing outweigh the risks?’

The Benefits of Outsourcing In Procurement

There are many benefits to outsourcing non-core activities, including;

  • Freeing up more time for internal staff to focus on the business’s core activities.
  • Offering the ability to access expert, high quality services without the need for staff training and operating costs, investment in new technologies, etc.
  • Allowing increased productivity and efficiency in outsourced activities.
  • Streamlining of operations.
  • Faster adaptation to change.
  • Reduced issues with team management.
  • Cut overall operational costs.

Realistically, keeping up with a fast paced and constantly changing market is difficult and costly, which is why more and more organisations are turning to outsourcing as a solution. It allows the company to spend more time adapting their operations for long term change, which the outsourcing partner handles the non-core activities.

The Risks of Outsourcing in Procurement

Cost and efficiency are recurring themes throughout the list of benefits of outsourcing, but do these benefits outweigh the risks? Let’s take a look at what those risks are:

  • Security and confidentiality are at risk when outsourcing processes such as tax preparation, payroll and financial account management. The outsourcing partner would therefore need to be thoroughly vetted and there would need to be terms written into the contract to ensure this risk is minimised.
  • The process of managing outside providers is different to managing in-house processes, and this switch can sometimes prove difficult. Understanding how outsourcing partnerships work in general and setting communication and management guidelines with the provider should ease this transition.
  • Outsourcing activities can create lack of work for in-house staff and may lead to redundancies. This can be an unsettling situation for the workforce and it will be important to keep moral up by showing that your in-house workforce is still valued.
  • Outsourcing providers who specialise in a particular area often have several clients, meaning you don’t receive their undivided attention as you would with a full time in-house team. As mentioned before, understanding the communication process and setting guidelines will make for a better working relationship with the service provider.
  • Although outsourcing is cost effective, there may be hidden legal costs involved. This can be avoided by ensuring you are aware of any costs the company will incur prior to signing the outsourcing contract.

In conclusion, although there are risks involved with outsourcing, they are not unavoidable. Ensuring that proper research is done on service providers and time is spent crafting a well-written contract will allow outsourcing to benefit the company.

Building a strong working relationship with service providers and having clear guidelines for the work being carried out and the communication process between the two companies will ensure that outsourcing benefits the organisation on a long term basis.

In answer to our original question, providing the necessary steps are taken to minimise risk and optimise benefits, the benefits of outsourcing in procurement can outweigh the risks.

 

If you would like to learn more about the outsourcing in procurement, take a look at the CIPS Advanced Diploma in Procurement and Supply. The course is accredited by the Chartered Institute of Purchasing and Supply (CIPS) and provides senior buyers and contract and supply chain managers with the expertise to improve organisational procurement and to fulfil organisational objectives. It gives you the knowledge base to reduce cost, improve quality, manage the supply chain and deal with legal issues.

Many employers offer part or full funding for the course as part of on-the-job training. If you would like to find out more about the procurement and supply chain management courses offered, please call (0)1865 515 255 or email enquiries@oxfordpeg.com.