Procurement outsourcing in large New Zealand organisations

Abstract

The aim of this research is to identify future plans for outsourcing of procurement in large New Zealand organisations.

Outsourcing as a business strategy is growing internationally; organisations are now outsourcing a wider range of business functions than ever before. This trend is expected to continue as organisations look for ways to reduce costs and increase effectiveness. Whilst accounts of successful outsourcing projects are common, many organisations report dissatisfaction with outsourcing experiences.

Factors that contribute to successful outsourcing projects include;

- Carefully clarifying objectives

- Paying close attention to performance management

- Actively managing the outsourcing arrangement

- Giving responsibility to executives talented with exceptional relationship management skills

Outsourcing of business procurement activities has also increased in popularity in recent years with significant international growth predicted. Outsourcing is becoming a more common business activity in New Zealand but little is known about the outsourcing of procurement activities and expected trends in New Zealand.

This research considered literature on outsourcing and procurement and surveyed seven large New Zealand organisations chosen from across industry sectors to approximately reflect procurement outsourcing trends. All participants have considered outsourcing procurement activities to varying degrees but prefer to retain control of procurement in-house. All have evaluated outsourcing opportunities however only two used structured outsourcing models to guide this process. This research identified a need for a model to provide a guiding framework for outsourcing procurement projects.

Whilst the willingness of the surveyed organisations to consider outsourcing procurement is consistent with the literature on this subject; this study found that New Zealand organisations are significantly more cautious about the potential for outsourcing procurement. This cautiousness is related to concern about the size and capability of the New Zealand market and perceived risks to business performance.

This research has limitations in that the sample of seven New Zealand based organisations is small, further research could include a wider sample with a larger number of respondents from participating organisations. This approach enabled the blending of procurement and strategic business outsourcing experiences and provided answers to the research question posed. It also identified opportunities for further research and development of a procurement outsourcing model.