Bpo Advantages And Disadvantages

1000 Words4 Pages
PROCUREMENT OUTSOURCING BENEFITS FOR SMEs

Growing business organizations are constantly looking for ways to improve their performance by decreasing operational costs and increasing revenue. Business Process Outsourcing (BPO) is one of the strategies that can facilitate these goals. BPO refers to outsourcing of business processes to external agencies, with the goal of relieving the company of non-business-critical tasks, while concentrating on its core business.
Procurement is one of the most overlooked candidates for BPO. Procurement Outsourcing (PO) is a process when organization moves part or full scope of its sourcing activities to another specialist body. Implementing PO can bring considerable benefits to small and medium enterprises,
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The study concluded that companies with implemented PO strategy had on average 8.3% savings in operational and strategic procurement, and 30% lower costs to process requisitions than companies that did procurement in-house.
Another advantage that comes from PO is contract compliance and contract savings. The same study estimated a 55% contract compliance rates in the companies with outsourced procurement function. PO agencies can do much more than just help to set right frameworks – they can ensure contract savings. With right contract terms and monitoring in place, money can be saved in areas like order management, supply schedule, indirect spend management and much more.
There is also a matter of fraud. Managing small expenses provided by a multitude of vendors can be challenging, especially if scaling up. Poorly managed expenses, even small once, leaves space for errors and even intentional mischarges, which over time can result in considerable expenditures. By outsourcing contract and spend management tasks to a third party, organizations immediately reduce the possibility of such errors and fraud happening in their purchasing
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