The procurement process is an intricate part of a company’s strategy because it has the potential to determine the outcome of its operations. It is essential that the price of procurement set by the company is lower than the profit made by selling its products.

However, lowering procurement prices can prove to be extremely difficult for a company when it relies on its own resources only. In fact, one of the most successful methods of streamlining the procuring process is outsourcing it. Essentially, this means transferring a set of key procurement-related activities to a third party with the aim of reducing the overall costs of the process.

Companies now have the option of working with Procurement Services Providers (PSPs), which specialize in procurement management and as such, are able to help entrepreneurs get the best possible procurement plans. Let us tell you a bit about this process so that you can fully grasp the potential of outsourcing procurement and PSPs. Here are the main things you should know!

What Is Procurement?

By definition, the procurement process is “the act of obtaining goods and/or services”. It usually entails intense preparation, assessing and comparing offers and demands, and obtaining end receipts and payment approvals. The main steps of the procurement process are as follows:

1. Identifying the needs of the company
2. Suppliers research and source option identification
3. Value analysis
4. Financing
5. Price negotiation
6. Purchase order
7. Delivery
8. Receipt of purchase and inspection
9. Approval of invoices and payment
10. Record maintenance

You can read more here on the entire procurement process and steps.

Procurement Categories

According to their role in the production process of a company, there are two main procurement categories known in business:

• Direct Procurement – This category includes all the goods purchased by a company to serve as the raw material for the production process. For instance, direct procurement for a clothing company includes fabrics and sewing threads.
• Indirect Procurement – This category includes both goods and services which are purchased by a company with the aim of conducting all of its operations. This includes everything from IT, HR, and PR services to utilities and facility management.

What is Procurement Outsourcing?

Outsourcing procurement involves transferring the entire procurement process or only a part of it to a third party, which in most cases is a company that specializes in this department (a PSP). It has the ability to access more advantageous offers that meet the needs of the company and that can ultimately lower the price of procurement considerably.

5 Advantages of Procurement Outsourcing

Collaborating with procurement services providers is extremely advantageous for companies because they can essentially replace an internal department with a team of highly trained professionals who specialize in procurement and who have access to a far wider array of purchase options. The main advantages of outsourcing procurement are as follows:

• Collaborating with PSPs avoids the creation of an internal procurement team.
• The procurement process will be conducted by experts in the field.
• PSPs can provide companies with far more advantageous options because they have longstanding relationships with service providers and manufacturers.
• PSPs can complete the procurement process considerably faster.
• PSPs can lower procurement prices significantly, thus increasing the company’s profits.

Procurement Services Providers (PSPs)

Procurement specialists with a considerable experience in the field present two main advantages:

• Their teams are comprised of procurement experts.
• They have longstanding work relationships with manufacturers, transportation companies, and many other high-quality service providers.

Professional procurement services providerscan actively replace an internal procurement departmentwith expert service conducted by some of the best professionals in the business. Collaborating with successful PSPs is far more profitable for companies than investing insolid procurement teams of their own because thesecan essentially offer a better-quality service at a lower price.

PSPs meet with the company representatives and work alongside them to determine their exact procurement needs. Then, according to the guidelines and the requirements set by the company, they will create a complete list of purchase options.

While the PSPs will offer their recommendations, the company managers will make the final decision regarding the purchase options. Then the PSPs will handle the final steps of the procurement process so that the company has its necessary items delivered in full in the shortest time possible.

Some PSPs have quite a few air and sea freight forwarder in china as sub-contractors, allowing them to manage the entire shipping process personally. This capability can significantly reduce shipping duration and ultimately streamline the entire procurement process. The fact that they offer this service sets these companies apart from their contenders and establishes them as one of the top PSP choices, leveraging a network of skilled italy freight forwarders to enhance their logistics capabilities. Alliance Packing and Shipping INC provides expert crating services.

To sum up, outsourcing procurement has the potential of making a company’s operations more profitable by making the entire procurement process more efficient. PSPs can provide companies with more attractive purchase prices and deliver their items considerably faster. Moreover, the price of this service is ultimately lower than investing in an internal purchasing team, thus making PSPs an offer that no company can afford to refuse.