Procurement and Purchasing Strategies(Critique) - Essay Example

In this paper, this concept will be discussed in detail considering three scholarly articles in order to know what benefits does outsourcing provide to companies and what concerns companies usually have in deciding whether they should outsource the procurement process or not. Discussion The articles chosen for this discussion included ‘The Make-or-Buy Decision in the Presence of a Rival: Strategic Outsourcing to a Common Supplier’ by Arya, Mittendorf and Sappington, ‘The procurement function’s role in strategic outsourcing from a process perspective’ by Carter and Yan, and ‘Strategic procurement outsourcing: a paradox in current theory’ by Fernandez and Kekale.

The main concept behind all of these articles is that outsourcing is basic need of today for companies to operate efficiently. For example, Carter and Yan (2007, p. 210) state that there are many benefits of adopting this approach some of which include reduced costs, improved competitiveness, and increased focus on other business processes. Some more benefits of outsourcing the procurement function to external sources include improvement in efficiency levels and reduced transaction costs (Fernandez & Kekale 2007, p. 168). Procurement outsourcing also provides strategic benefits to companies (Arya, Mittendorf & Sappington 2008, p. 1749). Moreover, Fernandez and Kekale (2007, p. 168) also found that reduced cost is a very significant benefit of procurement outsourcing if we consider the increased percentage of external goods and services purchases.

Fernandez and Kekale (2007, p. 168) also found that a company outsourcing its procurement functions can achieve at least five times more saving as compared to the savings that achieve from outsourcing other processes, such as, HR activities and financial operations. This figure suggests that procurement outsourcing is really a very beneficial aspect of doing business in the modern world where the competition is continuously increasing with every passing day. However, companies usually have some concerns regarding outsourcing their procurement functions to external sources.

For example, managers of such companies feel that they will become dependent on other firms if they completely outsource the procurement function. They also feel that this approach will lead to downsizing ion their firms which will out a negative impact on the careers of many employees working for purchasing and procurement department. Manager also have other concerns like what they should actually outsource, whom should they outsource their procurement function, and whether outsourcing to a common supplier in presence of competitors will be a viable option or not (Carter & Yan 2007; Arya, Mittendorf & Sappington 2008).

Some managers think that if they outsource their procurement function to a supplier which is also serving some of its competitors, it will increase the cost because of monopolistic power of the supplier. However, in actual, there is no such case and the monopolistic input supplier serves all clients equally (Arya, Mittendorf & Sappington 2008, p. 1747). According to Cohen and Roussel (2005), the purpose of outsourcing is to add value to suppliers while reducing business costs. Procurement means to acquire those goods and services which a company needs to have for completing its manufacturing processes.

If these goods and servi