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Procurement Outsourcing Problems And Why You Don't Want Them

Michael Wilson | Apr 18, 2014

Outsourcing your procurement of supplies, equipment, and inventory to a third party can be beneficial to your company in a number of ways. Not only can it reduce the costs of ...

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Outsourcing your procurement of supplies, equipment, and inventory to a third party can be beneficial to your company in a number of ways. Not only can it reduce the costs of inventory, it can allow you to eliminate one extra hassle from your regular duties and upkeep, so that you can focus instead on the things that you do best. However, any policy is only as good as its implementation. If you implement procurement outsourcing poorly, it can lead to all sorts of problems. Here are three of those problems, and how you can avoid them.

Lack of Purchasing Control


Outsourcing any task or process is a tradeoff. On the one hand, if someone else handles it, it's one less thing for you to worry about. On the other hand, outsourcing means giving up a degree of control over the task being performed.

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It's this way with procurement outsourcing. The trick is knowing just how much control over your purchases to retain. Many companies make the mistake of simply giving the third party company free reign. They'll provide them with little more than a "shopping list" of purchases that need to be made.

When this happens, you run the risk that your procurement company will purchase the wrong items: inferior products to save money, items that are way out of your budget, or simply something that's missing a key feature or function. Fortunately, this is simple to avoid. Work with the procurement company and make sure they understand your needs: the quality of product, the parameters it needs to fall into, your budget, and other important factors.

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Continuity Issues


When you switch from managing your own procurement needs to using a third party, there can be a bit of a transitional period. If you're not careful, it could lead to a gap in service: something you were running low on when they took over wasn't ordered in time, and now you don't have it when you need it. It's important to work with your procurement company to plan for this and come to a solution before the transition occurs.

Lack of Management Control


Your company has certain standards it needs to meet. You have contracts to uphold, service level agreements that must be adhered to, and more. It's not as simple to ensure your procurement company's compliance with these standards as it is to ensure your own. It's important to let the company know these parameters at the beginning, and oversee their purchases to make sure they meet those parameters.

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Some companies believe that good procurement outsourcing means finding a good purchaser that can be left to their own devices, so they never have to worry about it. It's this mindset that leads to problems. It's essential to work with your procurer and oversee their purchases, to make sure they meet your needs and act in your best interests. This way, you can remain in control of your own company, while still eliminating the hassle of making all those purchases yourself.

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