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Manufacturers need convincing of outsourcing benefits as 83% not outsourcing at all

In what is considered to be tough economic times, four in five (82 per cent) European manufacturing decision-makers see cost reduction of indirect good and services such as IT, professional and facilities management services as a key priority in their procurement strategy.

Image © Copyright Lairich Rig and licensed for reuse under the Creative Commons Licence.

Manufacturers need convincing of outsourcing benefits as 83% not outsourcing at all Image © Copyright Lairich Rig and licensed for reuse under the Creative Commons Licence.

62 per cent also cited improved quality/reliability of services delivered to the business, and 60 per cent said the need to reduce and better control spend as well as improve business and operational risk are the factors most likely to trigger outsourcing consideration.

Xchanging, the business process, procurement and technology services provider, released initial findings from its first survey looking at the trends and challenges in sourcing and procurement outsourcing in the European manufacturing sector.

However, what at first looks very positive for the FM and other indirect service providers has a big BUT – the research also reveals that where no outsourcing experience exists, reservations remain high. Add to that the fact that only one in six manufacturing companies surveyed are currently using procurement outsourcing – the service industry has a long way to go to prove its benefits.

Furthermore:

  • Of those not already outsourcing, only around one in twenty (6 per cent) plan to start outsourcing in the next 1-4 years
  • Personnel issues making outsourcing economically inefficient (52%) and dispersed organisational structure and multiple locations/systems making it complicated (54%), were cited by respondents as the main barriers to expanding use of external sourcing and procurement service providers
  • Over half of businesses who do not use external providers (51%), cite losing control of their organisation’s sourcing and procurement as a key concern

On this, Nick Ford business development and market director at Xchanging Procurement Services,  which commissioned the survey, comments:

“We know that a large number of manufacturers remain to be convinced of the benefits of outsourcing functions, with four in five not outsourcing anything whatsoever. This is why our industry needs to focus on spreading the message about benefits and value delivered by outsourcing, and highlighting real and measurable achievements in terms of quality and cost reductions.”

 

 

 

[1] The study was conducted by European software/ICT market analyst Pierre Audoin Consultants (PAC). 221 sourcing and procurement decision-makers across the European manufacturing industry were surveyed.

Research conducted by Pierre Audoin Consultants (PAC). Of the 221 manufacturing respondents who took part in the survey, 80% held a CPO or Head/Director of Procurement position, and the remainder were CFO’s, COO’s and Head of Shared Services. Almost half (49%) were from companies operating in more than 10 countries, and with an annual revenue of €0.5bn-€2bn. 69% represented companies with a spend of between €50-€250m per annum on indirect goods and services; 19% from companies spending €250-€500m, and 12% spending in excess of €500m.

 

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