The term Procurement Outsourcing (P/O) refers to the transfer of the functions of procurement to a third party sourcing. The purpose is to cut down on the overall cost and to simply the cycle so as to concentrate on the core competencies of the business. PO is among the top outsourced functions at Fortune 500 and Global 2000 companies, particularly for their indirect spend, where large quantities of goods and services are sourced. This article takes you through the concept of procurement outsourcing ct.
Procurement outsourcing (P/O) denotes the application of a consulting company to assist you in purchasing raw materials and parts from various suppliers. Experts in this industry are experienced in numerous ways to enhance the efficiency and effectiveness of the ordering process. In addition, due to their network of contacts in the industry, they can make introductions and understand the sales process of these suppliers, in order to obtain mutually beneficial business relationships.
Most organizations that have a clear definition of direct and indirect P/O have a well-established supply chain and highly refined processes, tools, etc., for their direct P/O requirements. Also, while most enterprises have dedicated procuring teams for their direct procuring, very few have resources focused on indirect procuring as it is wrongly perceived to be less strategic and less valuable.
Indirect P/O is defined as any purchases made by an enterprise that are not related to direct production of goods and services but to enable functioning of business activities. They are not part of the production, however, are very important for smooth functioning of the company's operations. Indirect P/O includes sales and marketing costs (advertisements, hiring marketing agencies), travel expenses, HR services (recruitment, raining), office supplies (stationary, printers, computers and laptops), facilities (cleaning, house-keeping, catering) MRO (maintenance and repair operations) and capital expenditures (plant & machinery).
Another benefit of using a third party consulting firm for purchasing and acquisition services is the additional level of internal controls that it produces. A major element of having significant internal controls is the checks and balances related to segregating tasks. Through P/O, you will have a further separation of duties that adds an extra level of review to the task. This further improves your controls.
At the foundation of a decision to obtain procurement services is the potential return on investment that companies earn on behalf of their assets. Typically companies will have a limited number of financial resources that are easily accessible. Due to this fact, they will generally have to turn their point of focus toward investment opportunities that aggressively enhance their competitive edge.
It is worth mentioning that this process does not entail laying off the staff manning the purchasing department and bringing everything to a halt. Rather, the practice involves outsourcing strategic functions that ensures the core competencies and improvement of the general company. It enables a business to enhance its core competencies while leveraging on the larger non-core functions that contributes to the overall performance but do not necessarily require any investment in terms of infrastructure.
In any case, it is imperative to require your investment in selecting the best supplier. Don't just connect with any organization since you need to offload a few assignments. Start by finding out your needs, then search for various organizations. Make correlations against the variables showed previously.
Procurement outsourcing (P/O) denotes the application of a consulting company to assist you in purchasing raw materials and parts from various suppliers. Experts in this industry are experienced in numerous ways to enhance the efficiency and effectiveness of the ordering process. In addition, due to their network of contacts in the industry, they can make introductions and understand the sales process of these suppliers, in order to obtain mutually beneficial business relationships.
Most organizations that have a clear definition of direct and indirect P/O have a well-established supply chain and highly refined processes, tools, etc., for their direct P/O requirements. Also, while most enterprises have dedicated procuring teams for their direct procuring, very few have resources focused on indirect procuring as it is wrongly perceived to be less strategic and less valuable.
Indirect P/O is defined as any purchases made by an enterprise that are not related to direct production of goods and services but to enable functioning of business activities. They are not part of the production, however, are very important for smooth functioning of the company's operations. Indirect P/O includes sales and marketing costs (advertisements, hiring marketing agencies), travel expenses, HR services (recruitment, raining), office supplies (stationary, printers, computers and laptops), facilities (cleaning, house-keeping, catering) MRO (maintenance and repair operations) and capital expenditures (plant & machinery).
Another benefit of using a third party consulting firm for purchasing and acquisition services is the additional level of internal controls that it produces. A major element of having significant internal controls is the checks and balances related to segregating tasks. Through P/O, you will have a further separation of duties that adds an extra level of review to the task. This further improves your controls.
At the foundation of a decision to obtain procurement services is the potential return on investment that companies earn on behalf of their assets. Typically companies will have a limited number of financial resources that are easily accessible. Due to this fact, they will generally have to turn their point of focus toward investment opportunities that aggressively enhance their competitive edge.
It is worth mentioning that this process does not entail laying off the staff manning the purchasing department and bringing everything to a halt. Rather, the practice involves outsourcing strategic functions that ensures the core competencies and improvement of the general company. It enables a business to enhance its core competencies while leveraging on the larger non-core functions that contributes to the overall performance but do not necessarily require any investment in terms of infrastructure.
In any case, it is imperative to require your investment in selecting the best supplier. Don't just connect with any organization since you need to offload a few assignments. Start by finding out your needs, then search for various organizations. Make correlations against the variables showed previously.
About the Author:
When you're seeking procurement outsourcing CT offers this service at a reasonable cost. We recommend this long-established and well-respected company at http://outsourcedpurchasing.com/services.html.