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Procurement outsourcing 'expands by 10%'

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Posted on 28/06/2013 by Wayne Brophy FCILT

A growth rate of ten per cent was seen in the procurement outsourcing market during 2012, it has been reported. Everest Group's Procurement Outsourcing Annual Report claims the market expanded to reach a total value of £1.13 billion. The firm said inorganic growth emerged as "a major driver", contributing around 60 per cent to the increase in market size.

The Everest Group said the market was driven primarily by consumer goods and manufacturing seeking cost efficiencies. Financial services and tech firms also helped create procurement jobs last year, the report indicated. The majority of the companies spending on procurement outsourcing were large organisations, however the firm said that an increasing number of small and medium-sized businesses were also active.

While the Everest Group said the management of indirect spend tends to be more commonly outsourced, it noted that more firms attempted to pass direct spend on to a third party during 2012, reports Supply Management. The report also claimed that more companies are taking out contracts covering multiple countries.

Saurabh Gupta, vice president at Everest Group, said a majority of savings in procurement outsourcing is derived from procurement spend reduction and compliance. "This only now is becoming efficiently enabled by indirect category expertise and access to new technologies that service providers are now beginning to invest in," he stated.

A recent report highlighted the potential procurement has to save money and improve operational management. The 2013 Chief Procurement Officer (CPO) Study, conducted by the IBM Institute of Business Value, suggested there are a number of ways through which CPOs can maximise profits. The firm said top procurement organisations use data analytics to identify weak points in the supply chain, and gain insight on company and network operations.

Craig Hayman, general manager of IBM Industry Solutions, said that as CPOs take a broader view of their role and embrace technology, they have "an unprecedented opportunity" to become even more instrumental in transforming their organisations. He said they can model themselves against the world's most innovative and effective procurement organisations.

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