Potential and Limits of Outsourcing Procurement

Seminar paper from the year 2004 in the subject Business economics - Supply, Production, Logistics, grade: 2.0, University of Göttingen (INSTITUTE OF PRODUCTION & INVESTMENT RESEARCH), course: Industrial Management, Accounting and Corporate Planning, language: English, abstract: Paper describes potentials and limits of outsourcing procurement§§The increasing complexity of the business environment and the internationalization of business activities in the past decades have led to an increase of market dynamics. For companies, it is therefore increasingly important to be flexible from the tactical and strategical point of view, to keep costs under control and to maintain or even increase their level of performance with regard to worldwide competition.§§Companies have to adjust their internal organizational structure concerning cost and efficiency aspects, also with regard to the core competences each company specializes in. The outsourcing of competences to certain suppliers and service providers is regarded as a main strategy to secure competitiveness.§§Therefore, the usage of new communication -and IT-tools is getting more and more important.§§This paper shows the potential and limits of outsourcing the Procurement when companies try to restructure their organization. Beside conventional possibilities of outsourcing, new electronic procurement-solutions have become more popular during the last decades. The focus of this paper lies on such new electronic procurement-solutions. Chapter 2 describes the basics of Procurement and Outsourcing. Based on this, chapter 3 shows potential and limits of both, conventional solutions of outsourcing and also new modern solutions. To get a more practical view, the paper describes the topic by means of two examples from the automobile industry by BMW Group and the DaimlerChrysler AG. Finally, the paper gives a summary and a preview regarding upcoming business challenges of outsourcing procurement.