Procurement is an important part of business transactions for organisations around the world. The planning for procurement though depends on a number of factors which define a procurement plan for present and future needs.
Businesses around the world hire top procurement companies in an effort to perfect their procurement function and ensure efficiency in all related functions.
However, the question may arise why organisations shouldn’t procure directly and spend time and money for outsourcing? To put it simply, in comparison to both processes, outsourcing procurement is far more profitable. Let’s take a look at why:
Direct procurement can lead to very high costs since an organization will not have access to the market intelligence that an outsourcing company will have. Also, direct procurement can lead to consumption of more time and resources which can be focused on internal company functions.
Another point to note is that organisations sometime need to make small scale purchase which will cost them much more than their budget. Additionally, vendors don’t offer one time discounts to buyers who buy sporadically whereas an outsourcing company will ensure that you get the price for the services and goods you need.
Let’s be real, it’s almost impossible for organisations to focus completely on the standard of goods when their core function is focused on bringing profits. This leads to a weak procurement system where standards are not as per the amount spend.
Let’s assume the quality of goods are not upto the mark for a period of six months, but the procurement function is overburdened and doesn’t realize the issue till it’s out of hand. In that case, finding new vendors in a budget which suits your organization becomes a difficult task.
In a country like India, vendor and buyer relationship holds a lot of importance. In case of emergency or lack of quality goods or delay in payment, a healthy relationship with a vendor can last a long time. If you hire an outsourcing company, the company will be responsible for handling all relationships with vendors and will also insure they put in time and effort in researching the best vendors in fields related to your organization. The responsibility of vendor management, procurement, payment to vendors, market intelligence lies with the outsourcing company thus drastically reducing the burden on your organization.
However, before hiring a procurement company, it is important to analyse and investigate if your organization needs a procurement company at all. Once the organization has decided on a course of action, the procurement company will take over and work on actionable points.