“Indirect Procurement” – the act of purchasing services or supplies required to keep the day-to-day business alive. Sound familiar? SMB owners are well acquainted with the range of materials and activities required to keep the lights on – as a non-essential role, they don’t necessarily add to the bottom line, but without them the doors would close. Without indirect procurement, businesses would not be able to operate in an effective fashion – typically, it is responsible for 15-27% of a company’s total revenue.
Having established the critical – albeit non-essential – role that indirect procurement plays in the operations of a business, it would be smart to explore how BPO (outsourcing) companies can support SMBs in generating more value. It’s a fact: the rise of business process outsourcing over the last two decades has completely transformed many industries. It is now routine for organizations to hand over various activities, processes or entire operations to third parties. It’s not unusual for companies to lack the ability to identify potential opportunities and realize the full value to be inherently found in indirect spends, making outsourcing an increasingly strategic approach.
Many companies are going the route of finding that balance between home-grown and out-sourced activities, allowing them to capitalize on their true strengths while taking advantage of the value generation, preservation and enablement that BPO (outsourcing) companies can bring to the table. For example, some businesses realize they lack either the expertise, talent, infrastructure, systems or all of the above to successfully manage and execute their non-core activities. This insight demands that they either develop the capabilities internally or outsource a portion – or all – of them.
Research shows that the majority of companies that make the decision to employ indirect procurement outsourcing tactics achieve cost reduction benefits (four to six percent over the first couple of years), and many of them use this period of time to identify which of these processes would be best served as an in-house measure. That’s right – this is not an all-or-nothing move. Outsourcing even the non-strategic activities can free up valuable space and time to develop internal improvements that will generate untapped value and savings. The way to shape this process is to identify whether the need is to create value or preserve value – two equally important functions.
There are many factors that come into play when identifying and acting on these qualifiers. When creating value is a priority, there are a number of questions to ask. Is creating a competitive advantage one of the goals? What are the skills, mind-sets and experience of in-house teams? How do the tools and processes – as they currently exist – measure up? What is the strategic importance of the category? In the same vein, deciding to outsource value-preservation activities would be based on whether the organization has the internal capacity to successfully execute these functions, and how to establish the balance between in-sourcing and out-sourcing.
The bottom line is that BPO / outsourcing companies like Anexa can unlock significant value for your organization and its capacity for growth. Deploying the expertise of a trusted outsourcing company can provide both short-term and long-term benefits, once the decision to outsource has been made. Establishing a partnership with Anexa – a twenty-year veteran in the outsourcing field – makes room for your organization’s investment in the people, processes and tools necessary to capture further savings and grow its market share.
Reach out to Anexa today to find out how we can successfully support your indirect procurement needs.