The current trends of the market have become quite fast-paced because of the internet and are constantly evolving. This has made it quite difficult as well as expensive too.
Therefore, many organizations have started considering outsourcing as their solution. This will help companies to devote more time to spend on their business operations for making long-term changes, while their outsourcing partner will handle the non-core activities.
You can get several benefits by outsourcing non-core activities that include:
- Enable your internal staff in focussing on the core activities of the business.
- Providing expert, high-quality services with no need for employee training, operating costs, new technology investment, and so on.
- Allowing increased efficiency and productivity in outsourced activities.
- Faster adaptation to a certain new change.
- Streamlining of operations.
- Decreased issues with your team management.
- Reduction of overall operational costs.
Procurement outsourcing is also not a new concept; companies have been using a third-party service provider for many years. Indeed, an increasing number of businesses are outsourcing their purchasing.
Between 2019 and 2024, the sourcing and procurement outsourcing market is predicted to grow at a CAGR of 11.8%, from $2,820 million in 2018 to $5,500 million over the course of 2024. However, much of that has thus far been limited to indirect spending.
Historically, most businesses now prefer to do procurement outsourcing from China primarily because of relatively very large numbers of suppliers, categories, and transactions that need much more focused resources, which can be difficult to achieve in-house.
For many years now, indirect purchases have benefited from various new technologies, practices, and also 3rd-party purchase outsourcing services providers.
What an outsourcing is?
Outsourcing can be a process of finding a certain external 3rd-party supplier for taking on the management of a procuring service. Generally, it will be used for certain non-core activities and preferably used when a company does not have necessary skills/expertise available in-house for a certain product or service.
Outsourcing can always help you to scale up or scale down as per your need. Indirect outsourcing refers to the goods and services that a company requires to run and manage its own operations. For commodities and services related to the business service or product, direct outsourcing is used.
Most companies in the western country prefer to go for procurement outsourcing from China through a certain procurement agent based in China who will be able to handle the procurement more effectively than any procurement manager in-house.
Benefits of outsourcing your procurement
- Process standardization:
Direct material outsourcing allows businesses to increase productivity in an industry that has seen little change. Bringing in third-party vendors who can implement protocols and best practices can help businesses streamline their procurement functions.
Process standardization, as well as the centralization of technologies and activities, can result in significant cost reduction. Any foreign company can benefit from procurement outsourcing from China since they just have to deal with one point of contact instead of managing several providers.
- Better visibility and control
Gaining improved visibility on spending is one of the most important procurement outsourcing benefits. Improved visibility provides for better control and direction. It is sometimes easier to enlist the help of a third-party source to ensure contract and process adherence and thus better manage cost than it is to make such adjustments internally.
- Better technology and analytics
Third-party consultants that provide organizing and managing that handle procurement, supplier management, expenditure monitoring, and category management, as part of a single integrated platform can help businesses streamline and digitize multiple operations within direct procurement.
Without spending a lot of money, businesses can modernize their procurement process and gain access to cloud-based software, big data, new technologies, advanced analytics, and also reporting tools.
- Experience and expertise
Not all companies in the western countries have got any expertise available in-house in every procurement area particularly related to procurement outsourcing from China.
Also, in the present business scenario, keeping a proper pace with the fast-evolving market condition has become very tough. Therefore, all these businesses are able to overcome all these challenges just by outsourcing.
All businesses will definitely stand to benefit from specialized skills, supply networks, market intelligence, and also market leverage that any third-party providers will be able to bring to them.
As a result, this will get translated into better negotiation power, higher discounts, favourable contracts, and also much more improved analysis. Also, it will offer the internal procurement team enough time to give their attention to certain strategic, core activities.
Most important thing is that it will offer the team a certain opportunity to learn more from any seasoned and well-experienced procurement specialists.
How can you build resilience in your supply chain?
- Prioritize your high-risk sources and also do a deep analysis of the various implications for your entire business.
- Any businesses who are doing single-sourcing from only one country must investigate whether this will be their safest strategy.
- Question your supply chain outside the first few levels with a specific focus on recognizing critical suppliers, which may be no longer financially viable.
- Ensure that you have got real transparency of whatever is now going on in the present supply chains.
- Try to evaluate the advantages of investing in certain systems that supply better data not only for improving efficiency, but also to take faster decisions and judgment to give more transparency.
- Look to create alliances even with your competitors for reaching a win-win situation.
- Use a certain mix of different forecasting tools to develop relationships with different suppliers available on the ground.
- Ensure that you have the required capabilities and provide training and develop your function for meeting the increased requirements of your business.
Volcanoes and tsunamis can disrupt supply networks, and experienced, up-to-date professionals are aware of this. The epidemic was the most difficult of all, but vulnerability has always existed, and experienced workers recognize that resilience is critical to keeping businesses afloat.
Recently we saw so many firms were caught off guard when the Covid-19 virus first reached China, which was the single-sourcing country for every business.