Procurement strategic outsourcing is not a new concept and has been with us for a long time. With the global economic downturn, it became even more important to be resourceful and find ways of cutting costs when it comes to procurement management. And procurement outsourcing services can definitely help with that.
It's a process where you outsource key activities involved with buying goods and services, such as supplier selection and contract negotiations, to an external third-party provider (also known as a procurement service provider). In this article, we'll explain what end-to-end procurement outsourcing is and how businesses can use it to their advantage.
What is outsourcing in procurement?
Procurement outsourcing is the process of delegating the sourcing and management of goods and services to an external provider. The main aim of procurement outsourcing is to reduce costs and improve efficiency, but there are many other benefits that make it an attractive option for businesses of all sizes.
What are the benefits of procurement outsourcing?
Procurement outsourcing solution providers help businesses improve efficiency and reduce financial costs by fulfilling their product or service needs right the first time. There are five major benefits to working with an outsourced procurement solution provider, including
1. Cost reduction
This is perhaps the most obvious benefit of procurement outsourcing, but it's also one of the most significant. A good procurement outsourcing provider will be able to help you identify opportunities for cost savings across your entire supply chain. In addition, they will have access to a large network of suppliers, which means you can take advantage of economies of scale and get better deals on the goods and services you need.
2. Improved quality
When you outsource your procurement functions, you also gain access to the expertise and resources of your chosen provider. This means they can help you source higher-quality goods and services at a lower cost. In addition, they will be able to help you implement quality control measures throughout your supply chain, which will help ensure that only the best products and services reach your stakeholders.
3. Increased efficiency
One of the biggest benefits of procure-to-pay outsourcing is increased efficiency in your operations. A good provider will have systems and processes in place that will help streamline your sourcing and procurement processes. This will free up time for your employees so they can focus on more important tasks, and it will help improve your overall operational efficiency.
4. Risk management
When you outsource your procurement functions, you transfer some of the risk associated with these activities to your provider. This includes the risk of supplier default, late delivery, or poor-quality goods and services. By partnering with a reputable provider, you can minimize these risks and protect your business from potential disruptions to your supply chain and operations.
5. Improved compliance
When you outsource your procurement functions, you also gain access to the expertise of your provider in terms of compliance with government regulations regarding sourcing and procurement. This means you can be sure that all of your activities are being carried out in compliance with applicable laws and regulations, which will help protect your business from costly fines or penalties.
Selecting the right procurement outsourcing provider
Organizations outsource procurement processes for a variety of reasons. Maybe your team is spread too thin and you need extra support during a peak season. Or, you might be looking to tap into a new market or complementary skill set. Whatever the reason, it’s important to do your homework when selecting a procurement outsourcing provider.
Here are four key considerations to keep in mind as you evaluate potential procurement service providers:
1. Do they specialize in your industry or sector?
Procurement is a complex function that requires deep domain knowledge and expertise. When evaluating potential providers, find out if they have experience working with businesses in your industry or sector.
- Do they understand the unique challenges and opportunities that come with operating in your market?
- Do they have existing relationships with the suppliers you rely on?
An experienced provider will be able to hit the ground running and provide immediate value to your organization.
2. What is their size and scale?
It’s important to find a provider that can support your current outsourcing needs as well as any future growth plans. Find out how many employees they have and if they have an established infrastructure in place. This will give you a good sense of their ability to support your short- and long-term outsourcing needs. If they don’t have the capacity to handle an increase in scope, it could create problems down the road.
3. What is their approach to pricing?
Transparency is key when it comes to pricing. Make sure you understand exactly how the provider charges for their services.
- Do they charge a flat fee or a percentage of spend?
- Are there any hidden costs?
Getting clarity on these types of questions upfront will help avoid any surprises down the road. In addition, be sure to compare apples to apples when considering different providers. If one provider seems significantly cheaper than the others, find out why. There could be some hidden costs that aren’t immediately evident.
4. What do their references say?
As with any major decision, it’s always a good idea to get input from others who have first-hand experience working with the provider. Ask them about their overall experience working with the organization—from the sales process through implementation and beyond.
- How responsive are they when issues arise?
- Do they proactively provide recommendations for process improvements?
- Do they make an effort to really understand your business goals?
These are all important factors to consider when making your final decisions. While there are a lot of factors to consider when selecting a procurement outsourcing provider—from their industry expertise and scale to their approach to pricing and referenceable projects. But by taking the time to do your due diligence upfront, you can be confident you’re selecting a partner who can help you reach your desired outcomes—now and in the future.
The state of SaaS procurement outsourcing
As SaaS procurement is becoming the norm in companies, there has been an increased need to outsource and streamline the process. First and foremost, it's important to note that in a subscription-based model, procurement is no longer a one-time event. Instead, it's an ongoing process that requires close collaboration and constant back and forth.
This can be a challenge, as there are thousands of SaaS vendors out there—and new ones are popping up every day. To stay ahead of the curve, procurement departments will need to continuously monitor the marketplace and keep up-to-date on the latest industry trends. This is why procurement teams need to entrust this taxing responsibility to a SaaS buying company.
SaaS buying experts like CloudEagle have a deep understanding of the various SaaS options on the market and can identify the best fit for the company's needs. Here are some of the benefits of outsourcing your SaaS procurement process to the right service provider like CloudEagle:
1. You can focus on your core business activities
Procurement business process outsourcing can free up your time so that you can focus on your core business activities. When you outsource, you can trust that the procurement process is in good hands and that you will receive the best possible software for your needs.
2. You will save more money in the long run
Outsourcing your SaaS procurement process can save you money in the long run. When you work with a reputable provider like CloudEagle, they will help you get the most bang for the buck by negotiating deals with vendors and helping you find the most cost-effective solution for your business.
Additionally, once you have chosen a software solution, your provider will continue to monitor the market to ensure that you are not paying more than you need to. If a better deal comes along, they will let you know and help you make the switch. Win-win!
3. You will get expert guidance throughout the process
When you outsource your SaaS procurement process, you will have access to expert advice and guidance throughout the entire process. From managing vendor relationships to navigating complex contracts, your provider will be there to help you every step of the way.
They will also provide recommendations on which software solutions are right for your business based on their experience with other clients. And if you ever have any questions or concerns, they will be happy to address them promptly.
Get started with procurement outsourcing
In today's climate of constant change and squeezed margins, more and more companies are turning to procurement outsourcing as a way to streamline their operations and save money. There are many reasons why businesses choose to outsource their procurement functions, but cost reduction, improved quality, increased efficiency, risk management, and improved compliance are some of the most important benefits that make this option so attractive.
If you're considering outsourcing your procurement functions, be sure to partner with a reputable provider who can offer these advantages and more. CloudEagle is one such company that offers deep expertise in negotiating and buying cloud software. Looking for guaranteed savings? Take a look at the list of services they offer and book a free demo today.