Procurement Outsourcing in small to intermediate companies

Master's Thesis from the year 2014 in the subject Business economics - Supply, Production, Logistics, grade: B, Tongji University (SEM), language: English, abstract: From a theoretical stand point procurement outsourcing adds value to customers by bringing onboard the required knowhow and enabling them to focus their resources on their core competencies. It is as well a cost cutting tool used by large corporation.In the recent years there have been more and more deals involving large multinational companies whereas SMEs (1-250 employees) and intermediate size companies (251- 4999 employees) were excluded from this trend. This might seem surprising as they should have the same, if not more, benefits than large companies. This exploratory study aims to identify what are the obstacles for smaller companies to use procurement outsourcing.Four reasons have been identified namely the price of implementing such a deal, the lack of resources devoted to introspective reflection about business optimization, the corporate culture and as a main reason the lack of procurement maturity.SMEs are expected to remain outside the procurement outsourcing trend because of the mentioned reasons while intermediate companies will shift to become the new growth area for providers as the breaks to consider outsourcing will ease. Another separate trend is the use of Master Vendors to optimize spend as the business model is suitable for companies of all size. A master Vendor provides procurement outsourcing on a very limited category as it aggregates supplier of lower tier offering it as a full service and an integrated solution.The drivers behind the expected changes are mainly the tense economic environment pushing companies to take bolder initiatives and the generalized implementation of management technics in small businesses. The most powerful identified driver is the SaaS (Software as a Service) Revolution: Affordable and high performant IT systems will be rolled out driving process standardization and formalization while bringing more transparency to the businessAs an outcome of this qualitative exploratory thesis I suggest a hypothesis explaining the obstacles preventing the implementation of procurement outsourcing agreement in smaller companies while modeling the forces driving change. Further quantitative research must validate or invalidate this hypothesis. I formulate as well recommendation for sales team of procurement outsourcing provider.