10 Procurement Outsourcing Services

The procurement office of Company A is a bustling place. The CPO is supported by strategic sourcing managers, category managers, buyers, analysts, contract managers, a compliance officer, an SRM manager, and others as new roles emerge.

Company B’s procurement team looks very different. In fact, it can’t really be called a “team” at all, because there’s only one professional sitting alone in an otherwise empty office. Yet this solo employee gets just as much work done as the entire procurement team in Company A thanks to the power of outsourcing.

What is procurement outsourcing

Procurement outsourcing refers to the practice of delegating procurement activities to external service providers or specialists.

Done right, its benefits can include:

• Cost savings: Outsourcing can potentially reduce costs by leveraging the expertise and economies of scale of specialized procurement service providers.
• Focus on core competencies: By outsourcing non-core procurement activities, the remaining in-house team can focus on their core business functions, improving efficiency and effectiveness.
• Access to expertise: Outsourcing allows access to specialized procurement professionals with expertise in various industries and categories. This can be particularly important during a talent shortage where specific expertise can be hard (and expensive) to find and hire.
• Scalability and flexibility: Outsourcing enables companies to scale their procurement operations up or down based on business needs without the need for significant internal infrastructure.
• Improved supplier relationships: Dedicated procurement service providers can maintain and enhance relationships with suppliers, leading to better terms, pricing, and quality.

Challenges of procurement outsourcing

But (there’s always a but!) there are several challenges involved with outsourcing:

• Transition and change management: Transitioning from an internal procurement team to an outsourced provider requires careful planning, knowledge transfer, and change management to ensure a smooth transition.
• Loss of control: Outsourcing certain activities means relinquishing some control over the procurement process, which may create concerns about quality, confidentiality, and compliance.
• Integration and communication: Establishing effective communication and integration between the internal team and the outsourced provider(s) can be challenging, requiring clear processes and regular updates.
• Security and confidentiality: Sharing sensitive procurement information with an external party may raise security and confidentiality risks, requiring robust contractual safeguards.
• Cultural fit: Finding an outsourced provider that aligns with the company's values, culture, and business objectives can be crucial for successful outsourcing.
• Set-up costs: The initial transition from an internal team to an outsourced provider may involve costs associated with knowledge transfer, training, and process setup.
• Service fees: Fees can vary based on the scope and complexity of the services provided. The key question is whether the outsourced service is significantly more expensive than the cost of managing that task with in-house employees.
• Contractual obligations: Companies may be locked into long-term contracts with service providers, limiting flexibility and potentially incurring penalties for early termination.

The decision to outsource procurement activities should be made after careful consideration of the specific needs, goals, and capabilities of your organization, as well as the potential risks and benefits associated with outsourcing.

The good news is that as procurement professionals, we are very good at evaluating, selecting, and managing relationships with multiple service providers, along with technical stuff like evaluating ROI and negotiating contract terms.

Types of procurement outsourcing services

In a nutshell – anything and everything can be outsourced, so long as you have someone left in the team to manage your suppliers.

There’s no right and wrong about what can be outsourced, but there are several different approaches. For example, one organization may choose to outsource all the tactical, low-level tasks and keep strategic procurement in-house. Some may choose to handle direct procurement in-house while outsourcing indirect management. Others may choose not to outsource anything that needs the human or personal touch such as supplier relationship management.

If you’re not sure where to start, it can be helpful to consider all the tasks carried out by the team in a typical sourcing cycle:

• Supplier selection and evaluation: Service providers can identify and assess potential suppliers based on quality, cost, reliability, and other criteria. If you start here and get this right, this provider could even help manage the rest of your procurement outsourcing for you.
• Request for Proposal (RFP) management: Creating RFPs and managing the time-consuming RFP process to solicit bids from suppliers.
• Contract negotiation and management: Service providers can negotiate contract terms and conditions with suppliers and manage ongoing contracts on your behalf.
• Purchase order processing: Outsourced providers can create and manage purchase orders for goods and services, another time-consuming and high-volume activity.
• Supplier Relationship Management: Even relationships can be outsourced. Service providers can build and maintain relationships with suppliers on your behalf, including performance monitoring and issue resolution.
• Strategic sourcing: Consulting firms can develop and implement strategies to optimize sourcing and procurement activities to align with your business goals.
• Market research: Suppliers can analyze market trends, conduct supplier market intelligence, and identify new suppliers.
• Spend analysis: Third-party procurement services providers can analyze spend patterns and identify opportunities for cost savings.
• Compliance and risk management: Service providers can be tasked with ensuring compliance with legal, regulatory, and internal policies, as well as managing supplier risks.
• Inventory management: Outsourcing forecasting and managing inventory levels to meet demand while minimizing costs.

Outsourcing to a GPO

What if there was a partner who could tick several of these boxes at once? Enter group purchasing organizations.

GPOs work to save their members more money, time, and effort by offering a range of services that simplify procurement. GPO members can skip over the lengthy supplier selection process because supplier relationships are already established. They allow organizations to bypass the typical RFx channels, avoid contract negotiations, and increase speed to savings thanks to portfolios filled with pre-negotiated contracts that are ready to go.

The Una Difference

If you're looking to outsource certain procurement activities, remember that not all group purchasing organizations are created equal. Most GPOs will be able to find savings, but their job shouldn't end there. Here at Una, we're different compared to some of the other GPOs out there - our people, values, and community engagement set us apart.

We've built an extraordinary team that combines experience, skills, passion, and purpose to offer members exceptional value. Our mission is centered around your success, and we work as an extension of your procurement team.

Our commitment is to educating, advising, and enabling your business to achieve tremendous cost savings. We're value-driven, member-centric, and partner-focused. And once we offer you turnkey procurement solutions that prove successful, we'll work on long-term strategies to make your business more profitable.

The best part? Our procurement outsourcing services help level the playing field so any business, no matter its size, can buy like the big corporations out there, especially when it comes to indirect spend categories.

Learn more about GPOs and Una membership by downloading a free copy of our playbook here.