Procurement Outsourcing Increasing

More companies plan to expand the outsourcing of their procurement activities in the next year, primarily in the purchasing of non-core items such as office equipment and supplies, according to a recent report released by the Aberdeen Group Inc.

In the May 2006 "Procurement Outsourcing Benchmark Report" nearly half of the 170 companies surveyed said they are outsourcing or planning to outsource some portion of their procurement activities. Companies that already are outsourcing procurement say they will expand those activities by more than 16% within one year.

Although most procurement outsourcing involves indirect materials, some manufacturers are starting to handoff purchasing of critical production supplies -- particularly commodity items that are open to bidding by suppliers.

According to the report, the top procurement process areas targeted for outsourcing over the next two years are:

  • Procurement execution/transaction management
  • Invoice reconciliation and auditing
  • Catalog content management
  • Logistics management
  • Spot-buy and operational-sourcing support
  • Payment
  • Strategic sourcing negotiation

Companies that outsource procurement say they're seeking access to improved pricing (66%), access to spending category expertise (50%), lower transactional processing costs and fewer burdens (50%), access to supplier intelligence (45%) and fewer full-time procurement employees (41%).

The Aberdeen Group recommends that organizations planning to outsource their procurement functions should first have maximized visibility of their spend and then centralize the responsibilities of their various spend categories before evaluating the potential to outsource them.

To access the full report, visit http://www.aberdeen.com/summary/report/benchmark/RA_ProcurementOutsourcing_RS-SB_3100.asp.

To view IndustryWeek's special report on Outsourcing visit: http://www.industryweek.com/ReadArticle.aspx?ArticleID=12123

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