Procure means to obtain, and procurement is the process of obtaining goods or services from an external source. In business terms, then, procurement refers to the whole process of finding available channels that can provide the required goods and services, dealing and agreeing on terms of acquiring those goods and services, and deciding on the method of procurement such as bidding, tendering, or negotiations.
Similarly, procurement services are the tasks carried out to ensure that all materials, equipment, supplies, and any additional services required by a business are being arranged for and provided at ‘highest possible quality’ and ‘lowest possible cost’. This means that the process also means finding the right mix of price, quality, and availability.
A procurement services provider is a third partner company that works as an extension for any business and supplements its internal processes. Such companies have their own staff qualified and trained for the very business activities that achieve a quality-cost balance and makes sure the on-time delivery of required sources. Additional responsibilities that a procurement service provider may also take over include supplier identification, strategic sourcing, and transforming procurement processes.
Types of procurement services
There are two primary categories for procurement services: strategic procurement and Contingency-based procurement; the former means to utilize the supply chain strengths and supply industry with pre-decided timings and schedules in addition to customized quality and quantity packages to ensure steady business operations. Contingency-based outsourcing refers to the one-off, maybe more, procurement services as and when the need arises. This form of procurement is usually more expensive. For businesses this can also be impossible if they don’t have a well-established supply chain cycle and have contingency finances available.
Why procurement service providers are needed?
Although appearing to be a no-brainer, procurement services have gained an identity of their own even beyond the gambit of usual business operations. Globally rising prices and competition and an ever increasing pressure of maintaining and improving quality while maintaining or reducing costs have made these services all the more important.
With incessantly increasing costs in every business segment, it has become much costlier to maintain procurement expertise in-house. With an external service, the burden of procurement reduces but along with it the responsibilities of researching the sources and having the staff to do the job are also eliminated. Furthermore, for your company procurement is a part of the whole chain but for specialized procurement service providers, it is their primary job to handle all steps of the procurement and therefore they are better equipped with better personnel and more efficient technology. Put together, this makes procurement service providers much less costlier and much more efficient in terms of improving competitiveness and productivity.
Also, as mentioned in the previous section, contingency procurement is easier for specialized procurement service providers and they might also be able to provide immediate supplies and services at a lower cost too if they have stocks and professionals on board themselves.
Benefits and problems of procurement outsourcing
Starting from the most obvious benefit of lowered costs, thereby increased profitability, there are several more benefits to be gained from taking on board an external procurement service provider. These include market leverage for better quality products, more and better discounts, higher knowledge of market dynamics and suppliers, better personnel, improved communication with suppliers, better management of information and more accurate purchasing analysis, and better opportunities for negotiations to make better deals.
There are, however, some flipsides to the story but not any that cannot be resolved with due diligence at the time of singing the contract with your chosen outsourcing partner. The pitfalls include possibility of supply chain breakdown or any confusion with regards to products, services, and timings. Then there is the obvious reduction in control from the primary business company, but that is a part of growth for any and every growing business. Final glitch might come from the challenge of integrating external partner and core business teams. But all of these issues are easily avoidable if proper planning and communication is done at the time of partnering with procurement service providers.
How Intersoft BPO can help you?
Intersoft BPO has the top notch qualified personnel well-versed in supply market. Since we treat procurement as one of our core business, we have better knowledge of industry and technology capabilities. Our experience with procurement has also allowed our staff to polish supply channels for both regular and contingency procurement. In addition to providing procurement services at only a fraction of the cost, we guarantee performance based results that smoothes your production flow and allow you to stay ahead of the curve.