Solutions and initiatives; the procedures; the disruptions; a scalable approach; etc.
A complex system like logistics requires a modular approach that makes it possible to achieve goals in the short term - can outsourcing also work wonders?
Tertiarization of procurement, if applied correctly, can lead to cost savings, increased efficiency in operating units and time savings
Increasing profits and reducing costs, gaining market share and defending against competition, specializing in a single field and exploring other areas, improving operational efficiency and reducing assigned personnel, increasing system efficiency and reducing inventories, finally achieving the maximum return through fixed structures and ensuring cost security - these ever-increasing demands confront company management.
It is obvious that some of these activitiesare in some way contradictory and represent a decision paradox, the resolution of which involves compromises between some. Carried out using traditional procedures, they generate additional costs without meeting the primary need to reduce costs - an attempt that strongly characterizes the market and demands ever greater competitiveness.
Solutions and initiatives
The solutions used so far have been diverse, and among the most successful are: the allocation of territorial and product competencies, the formation of working groups, the reorganization and division of areas into cost centers, the establishment of profit centers, decentralization and the concentration of activities. The means used to achieve these goals were initially insourcing, i.e. checking all possibilities for improving the internal structures in order to increase efficiency. All of these activities, even if they did not meet all expectations, still provided management with indicators to locate dysfunctions and identify improvement targets. It is also observed that the division into independent operating units has duplicated some internal functions and increased the complexity of communication between departments.
Parallel to these insourcing initiatives, the concept of tertiarization became increasingly established within production in the 1970s, after initial mistrust. The successes were impressive and led to a growing number of companies taking advantage of it. After the initial resistance was overcome, increasingly sophisticated forms of outsourcing emerged.
From 1970 to today, a lot has changed in large-scale industrial production: In those years, productions that were previously carried out in-house were outsourced to external suppliers. In the 1980s, the just-in-time process was introduced for assembly lines.
From 1990 onwards, suppliers built their own facilities directly close to the customer. From 1995 onwards, suppliers were allocated space within the factory and their production was carried out directly into the automated assembly systems. From 2000, suppliers are expected to be able to assume the role of an active partner in the definition and development of business strategies and contribute to the achievement of economic objectives.
From production to…
The first phase of tertiarization therefore involved production; Then followed the outsourcing of some internal services such as: maintenance, material storage, transport, company catering, factory cleaning, some training services and accounting, the management of information systems. However, such tertiarizations are now taken for granted, and their increasingly widespread application, especially in companies that want to free up resources, is leading management to consider the possibility of a similar application also for procurement management.
The aim of transferring the management of procurement, especially of non-productive materials, to an external partner is, on the one hand, to be able to concentrate the best resources more on strategic activities and, on the other hand, to achieve economic advantages by making operating costs more flexible. When the administration is transferred, most routine tasks are also decentralized, which contributes to increasing the motivation of the freed-up employees and develops higher professionalism in order to improve the company's competitiveness in the market and benefit from more intensive use of more lucrative market areas.
The procedures
The procurement process consists of a series of sequential activities or procedures ranging from the creation of the requirement notice and the placing of the order to the payment for the purchased goods. The number of procedures has increased over time due to the growing order quantity and the tendency to reduce inventory.
The application of the outsourcing concept by a world leader in the field of presses, especially for yearbooks and telephone lists for public users, has made it possible to reduce the volume of purchases and reduce operating costs by 15 times compared to before.
The development of each procedure that is part of the process creates a volume of documentation and information that ties employees up in its processing and takes away valuable time that they could otherwise use for their actual tasks, such as purchasing systems and raw materials, managing agreements and monitoring.
It can be observed that the number of procedures required to carry out procurement grows exponentially with the size of the internal structures involved in the process. At the same time, both the risk of procedural errors and information chaos increase, which dramatically reduces the efficiency of departments. This makes monitoring and management very complex, ramified and expensive. Such costs often exceed the value of the purchased item.
The disruptions
The effort required to individually manage all the procedures of the procurement process is quantifiable as long as the procedures are linear, that is, as long as there are no disruptions in the process flow - a common and underestimated phenomenon when estimating operational costs, which generates a series of support activities that do not directly serve the business purpose but become an administrative necessity. Procedural disruptions arise from various sources, are both internal and external to the operation, and can lead to shutdowns, requiring in the worst case scenario the entire sequence of activities to start over, resulting in a repetition of the same administrative activities, the creation of additional documentation and huge increases in costs for all departments through which the procurement process passes.
The introduction of administrative outsourcing is aimed precisely at drastically reducing the number of internal administrative and control procedures. It is precisely the management of these latter that absorbs a large part of the resources and means highly characterized for completely different tasks and it is above all the simplification of these administrations that shows the enormous potential for economic savings and increases in efficiency. An Italian company, one of the world leaders in the design of transport vehicles, and in particular active in two German factories for the design of fireproof vehicles, has used outsourcing to manage the procurement of production materials from around 70 suppliers, whose annual delivery volumes range from 50 to 95,000 units. This solution made it possible to reduce the number of deliveries and therefore invoices from 1,321 to 85 in 16 months - corresponding to 99.93% - and to reduce the number of invoices from around 1,000 to 40 - corresponding to 99.96%.
When considering outsourcing, there is always the fear of losing control of the situation. But once the roles, areas of competence and responsibilities of the two partners are clearly defined, the economic expediency can be made visible: this cannot be excluded from being compared with all the costs borne by the company for the internal provision of the services whose outsourcing is being considered.
A scalable approach
For this reason, Unitec has developed a concept that pays particular attention to this question and proposes a modular application that allows immediate economic profitability at every step towards outsourcing, through a series of proposals and possible applications, based on one adapted to the size of the company and Model that can be adapted to business requirements and, above all, is easy to introduce into existing structures.
The modular partial or total implementation of outsourcing, with the possibility of working in a team and training a coordinator, makes it possible to reconsider at any time the break in the service relationship and a new independent management, making the decision less difficult, carried by an external partner.
Unitec's administrative outsourcing of the procurement of non-production materials is based on experience gained with companies in different European countries and different industrial sectors, and the company structure also extends to production materials, thereby consolidating and diversifying knowledge - factors that represent an important guarantee of operation and reliability.
The outsourcing activities carried out by Unitec are supported by the use of an in-house developed and maintained information system, with an internal team of programmers carrying out integrated standard procedures and enabling data transfer between customers and suppliers.
The know-how in the field of information management, gained through experience with its own customers, allows Unitec to constantly test and offer to the customer new computer solutions and data transfers in order to improve communication and significantly accelerate information access, thereby reducing request and response times. All this using collaboration with highly qualified and professional personnel.
Collaboration with Unitec can be designed with great flexibility, from the placing of individual orders to the management of all procedures of the procurement process, which ranges from the creation of the need to warehouse management and the provision of computer solutions for office automation.
Conclusion
The introduction and application of administrative outsourcing and procurement management have allowed company management to finally solve the decision paradoxes mentioned at the beginning and achieve flexible actual costs, also recovering the precious resource of time, fundamental to be able to devote more time to strategic and primary company activities.
With the recovery of time resources in all areas of the company, the level of internal efficiency increases immediately, which enables better resource visibility and initiates a positive synergy spiral.
Understanding the importance of this result has shown that when all employees focus on the core business, the company can work wonders.