Procurement outsourcing refers to the process of outsourcing procurement activities such as vendor management, purchasing, contract negotiations, and supplier relationship management to third-party service providers. The growing need to focus on core competencies is driving many manufacturing companies to outsource non-core functions like procurement. Outsourcing procurement enables companies to gain access to specialized procurement expertise and technology at a lower cost. This enables reduction in procurement costs and overall operational expenses.
The global Procurement Outsourcing Market is estimated to be valued at US$ 5 Billion in 2024 and is expected to exhibit a CAGR Of 6.5% over the forecast period 2023 To 2030, as highlighted in a new report published by Coherent Market Insights.
Market Opportunity:
Reduced operational costs offer a key market opportunity for growth of the procurement outsourcing market. Outsourcing simplifies procurement processes, reduces manpower requirements and associated costs for in-house procurement teams. Third-party providers leverage economies of scale and specialized resources to negotiate optimal contracts with suppliers. This enables client companies to achieve 15-20% reduction in total procurement costs on average. Outsourcing major non-core procurement activities to expert providers eliminates the need for expensive ERP systems and resources required to maintain them. It offers a variable cost structure aligned with procurement spends. This provides organizations flexibility to focus budgets on core priorities. The significant cost savings potential is encouraging more companies to adopt procurement outsourcing.
Porter’s Analysis
Threat of new entrants: New entrants face high setup costs to establish their operations in this market as procurement outsourcing requires specialized skills and expertise.
Bargaining power of buyers: Large organizations have significant bargaining power as buyers in this market due to the volume of procurement activities they can potentially outsource.
Bargaining power of suppliers: Well established outsourcing companies have some bargaining power due to their domain expertise and experience however growing competition is reducing it.
Threat of new substitutes: There is no direct substitute for outsourcing procurement activities however some organizations may decide to perform these functions in-house.
Competitive rivalry: Market dominated by few large players resulting in high competition.
SWOT Analysis
Strength: Procurement outsourcing helps reduce costs and improve efficiency of procurement processes. Outsourcing providers have skilled resources and access to technology.
Weakness: Overdependence on third party for critical business function can be a risk. Transition and adaptability challenges when changing providers.
Opportunity: Growing business complexities and needs are driving increased outsourcing of non-core functions. Emerging technologies allowing innovative service delivery models.
Threats: Economic slowdowns can impact outsourcing spending. Compliance and security risks if vendors do not meet expectations.
Key Takeaways
The Global Procurement Outsourcing Market Demand is expected to witness high growth over the forecast period of 2023 to 2030. The global Procurement Outsourcing Market is estimated to be valued at US$ 5 billion in 2024 and is expected to exhibit a CAGR of 6.5% over the forecast period 2023 to 2030.
Regional analysis focused on North America which is the fastest growing as well as the dominating region currently accounting for over 40% market share. Growth in the region is driven by enterprises outsourcing procurement activities to achieve strategic benefits.
Key players related content comprises Key players operating in the procurement outsourcing market are Accenture, GEP, Genpact, WNS, Infosys, Capgemini. The major players are focused on strategic collaborations and new service launches to enhance their market presence.
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