In brief:
- Procurement leaders rank “efficiency and complexity” as their #1 challenge today.
- Outsourcing procurement to the right partner can solve these challenges, with 95% of organizations currently outsourcing procurement tasks.
- Procurement help desk, purchase order/purchase requisition management and support, and vendor master data management are common places to start an outsourcing journey.
- With the right partner, procurement outsourcing can unlock a wealth of benefits, including cost savings, access to top talent and the latest technologies, a streamlined Procure-to-Pay process, and more.
Faced with expanding scope, staffing shortages, and rising costs, procurement leaders now rank “efficiency and complexity” as the #1 challenge facing procurement organizations today – surpassing even supply chain volatility, according to the Amazon Business 2024 State of Procurement Report. Outsourcing procurement has emerged as an important solution for solving its operational challenges – with 95% of organizations outsourcing at least some procurement activities to third-party providers today, the report found.
Procurement is ripe for optimization efforts like outsourcing and automation, with “transforming the operating model” ranking as a key priority for procurement executives in The Hackett Group’s 2024 Key Issues Study.
It’s easy to see why. Efficiency and productivity gaps are on the rise as procurement workloads and complexity increase without a corresponding increase to staffing levels and budgets. Cost reduction measures are also taking center stage, ranking as the top priority for procurement leaders this year, The Hackett Group states.
Procurement outsourcing offers organizations the ability to unlock new avenues for cost optimization and efficiency – streamlining processes, leveraging automation capabilities, accessing skilled and cost-effective talent, and improving visibility into the end-to-end Procure-to-Pay process. This blog examines three key processes to start your journey – and the biggest benefits that await your organization.
Procurement and outsourcing: What are the top processes to consider?
Procurement outsourcing involves contracting procurement outsourcing companies to manage activities – typically with a goal of increasing efficiency, reducing costs, and letting internal teams focus on core competencies. While this can span processes ranging from strategic to transactional – and include both indirect procurement and direct procurement activities – partnering with a quality outsourcer who can streamline procurement processes and automate transactional activities can be the most effective way to start a journey.
Here are three common procurement processes to consider:
1. Procurement help desk
A responsive and efficient procurement help desk is essential for addressing queries, resolving issues, and ensuring a smooth procurement experience for internal stakeholders. It also ensures suppliers have a reliable point of contact for resolving issues, helping to strengthen relationships.
Outsourcing this function speeds response and resolution through standardized processes, automation capabilities, and dedicated support, freeing up in-house resources to focus on more important tasks such as supplier management and strategic sourcing, while improving overall user satisfaction.
What to expect from a quality procurement service provider:
- Knowledge base development: Empower users with self-help resources through a comprehensive, tech-enabled knowledge base, speeding resolution times and reducing dependency on help desk support.
- Performance metrics monitoring: Measure help desk efficiency with robust reporting, driving continuous improvement and a customer-centric approach.
- Process documentation: A well-documented repository of processes enables the help desk to efficiently address a wide range of inquiries, enhancing overall responsiveness and results.
2. PR/PO management and support
Effective management of purchase requisitions (PR) and purchase orders (PO) is pivotal for a seamless procurement process – providing clear oversight into spending and enabling faster fulfillment. Procurement outsourcing can enhance this process with best practices and automation that streamline workflows and enable better tracking and reporting of POs and PRs, providing real-time visibility that enhances decision-making and supports better financial management.
What to expect from quality procurement outsourcing services:
There are several key technologies that can deliver increased productivity and efficiency for procurement organizations including:
- Intelligent automation: Streamline the creation, approval, and tracking of PRs and POs to reduce manual errors and processing time.
- Supplier collaboration platforms: Access technology that connects buyers and suppliers to foster real-time communication and transparency in the procurement chain.
- Compliance monitoring: Ensure adherence to regulatory requirements and internal policies, mitigating risks associated with non-compliance.
If an organization does not have these technologies in place, look for an outsourcing firm that can provide them and plug into your existing systems infrastructure.
3. Vendor master data management
Inaccurate master data challenges effective vendor management – opening the door to financial and legal risks like paying the wrong vendor, miscalculating taxes, and fraud. This is an area that often involves a lot of manual activities to research, review, and input vendor master data into company systems.
Quality procurement outsourcing partners bring advanced Master Data Management (MDM) practices and automation, ensuring accurate, consistent, up-to-date, and comprehensive information about suppliers is available across your organization.
The result: better data accuracy that leads to smoother transactions and faster order-to-pay cycles – reducing errors and time spent on administrative tasks like data verification while strengthening vendor relationships through timely execution.
What to expect from quality procurement outsourcing services:
- Data cleansing and enrichment: Performance of regular data cleansing activities, ensuring data accuracy and completeness in the vendor master data file.
- Standardization and classification: Implementation of standardized processes for vendor data entry and classification, reducing inconsistencies and facilitating seamless integration with procurement systems.
- Integration with ERP systems: Expertise to integrate vendor master data seamlessly with enterprise resource planning (ERP) systems like SAP and Microsoft Dynamics 365, promoting data synchronization across the organization.
7 key benefits of procurement as a service
Here’s critical advantages you can achieve by outsourcing procurement activities to the right partner:
1. Cost optimization
Procurement outsourcing is a powerful cost-cutting tool, offering the potential to fundamentally transform how organizations manage their procurement functions. By tapping into economies of scale and leveraging business transformation expertise, quality procurement outsourcing providers can optimize operations and streamline processes to significantly lower costs, freeing up financial resources for strategic investments and business growth.
2. Access to skilled talent
Only 14% of procurement leaders say they have adequate talent to meet the future needs of their function, according to a 2023 Gartner report. Procurement outsourcing can provide instant access to highly skilled resources with deep experience supporting operations like procurement help desk for North American companies so internal teams can focus on higher-value, strategic activities.
Quality outsourcers also provide talent with the digital literacy to unlock the full capabilities and value of emerging tech like automation and analytics that can be too expensive or difficult to find at home. While 51% of CFOs plan to hire in critical areas like data analysis and forecasting this year, many are struggling to find finance talent who also possess the necessary tech skills to help guide the enterprise (PwC “What’s Important to CFOs in 2024?”).
3. Accelerating digital transformation
A staggering 98% of procurement leaders are planning investments or upgrades in analytics tools, automation, and AI-driven optimization of purchasing decisions in the next few years, the Amazon Business report states. But an average of 70% of digital transformation initiatives fail to capture the right value from their investments, according to Harvard Business Review.
Quality outsourcing partners bring a proven track record of helping companies across industries accelerate digital transformation – identifying the right opportunities, prioritizing a strategic roadmap, and achieving sustainable implementation success. They also can spread technology costs across multiple client accounts, making it far less expensive than if you had to purchase it outright for just your company.
Nearshore vs. Offshore: Navigating the Hidden Hassles of Outsourcing to Asia
4. Scalability and flexibility to meet fluctuating demand
Procurement outsourcing provides the scalability and flexibility to adapt to changing environments. As your operations grow or experience spikes in volume like seasonal fluctuations, outsourcers can quickly scale up and down without the headache of adding more internal resources or infrastructure, or carrying pricey staff not needed year-round.
5. Enhanced efficiency
Procurement is rife with time-consuming, tedious tasks, from creating POs to managing inboxes and help desks. But most organizations lack the time or expertise to streamline their operations effectively.
Through a combination of process optimization, extensive industry knowledge, and automation, outsourcing can stand up turnkey procurement operations infused with greater efficiency, cost savings, and agility. With operations running smoothly, your internal procurement team gains bandwidth to focus on higher-value activities.
6. Tailored compliance solutions
Navigating the complex and ever-evolving regulatory landscape is a perpetual challenge. Partnering with an experienced procurement outsourcing provider enhances compliance through standardized processes, industry-specific expertise, and advanced technologies that ensure adherence to both internal policies and external regulations.
Controlled, well-documented workflows and approval processes combine with continuous monitoring to identify gaps and risks – reducing the risk of fraud, duplicate orders, and manual errors. Automated checks and balances further minimize compliance risks by increasing audit readiness, tracking spending, flagging potential violations, and ensuring every purchase meets mandated guidelines before approval. This approach not only safeguards your business but also fosters a culture of trust and transparency in all procurement activities.
7. Streamlined accounts payable processes
Beyond the direct impact on procurement, outsourcing plays a pivotal role in enhancing accounts payable (AP). Outsourcing procurement helps streamline the end-to-end Procure-to-Pay (P2P) process; for instance, effective management of PRs and POs prevents exceptions like inaccurate or missing information that lead to payment delays.
This proactive approach mitigates the risk of errors, enhances internal controls, and helps facilitate on-time payments – ensuring a seamless flow from procurement to payment that enables AP to better forecast cash flow, take advantage of early payment discounts, and optimize working capital.
Why Auxis: Combining nearshore service delivery with excellence in finance transformation
Procurement outsourcing is on the rise, representing the fourth-largest function performed at shared services centers (Deloitte 2023 Global Shared Services and Outsourcing Survey). But not every outsourcing solution is created equal – and the Deloitte report notes that procurement is a top activity requiring proximity to your organization for success.
Partnering with a quality nearshore outsourcing partner like Auxis solves the challenges of outsourcing to distant locations in Asia – offering the real-time collaboration, cultural alignment, outstanding English proficiency, and best-in-class procurement talent from Latin America’s leading finance markets to maximize the benefits of procurement outsourcing.
Nearshore advantages combine with Auxis’ nearly 30 years of finance transformation experience, optimized operations, and cutting-edge technology to offer more than simple operational support – strategically transforming your end-to-end Procure-to-Pay organization into the true business partner your larger organization needs.
Some 95% of procurement leaders are looking to optimize their operations in 2025, the Amazon Business report found. Partnering with Auxis empowers businesses to efficiently navigate the challenges of modern procurement – fostering resilience, innovation, and sustained growth in today’s dynamic business environment.
Want to learn more about how outsourcing procurement operations can benefit your organization? Schedule a consultation with our Procure-to-Pay experts today! Or, download the new report published by SSON Research & Analytics and Auxis to learn more about why nearshoring to Latin America is on the rise among finance leaders: “2024 State of the GBS & Outsourcing Industry in Latin America.”
