Procurement outsourcing refers to the outsourcing of procurement processes such as sourcing or procurement of indirect or direct materials, management of purchase orders and payment approval to specialized third-party service providers. Procurement outsourcing helps various organizations to focus on their core operations by outsourcing the non-core procurement activities. Main benefits of procurement outsourcing include cost reduction, access to expertise, improved efficiency and risk mitigation. The global procurement outsourcing market is estimated to be valued at US$ 5.94 Bn in 2023 and is expected to exhibit a CAGR of 6.5% over the forecast period 2024 to 2030, as highlighted in a new report published by Coherent Market Insights.
Cost reduction is one of the major drivers of the procurement outsourcing market. Outsourcing procurement processes to third-party providers helps in reducing procurement costs for companies in various ways such as benefits of scale, access to global suppliers, specialized procurement expertise and automation of processes. For example, procurement outsourcing service providers can negotiate better deals and prices from suppliers due to high volumes. They also have access to global supplier networks which provides opportunities to source materials at competitive rates. Their focus and expertise on procurement also helps in eliminating non-value adding tasks and improving efficiency. Due to these cost savings, companies are increasingly outsourcing procurement functions which is driving growth of the market.
Another driver of the procurement outsourcing market is the access to expertise it provides. Procurement is a complex function requiring specialized skills and knowledge about sourcing strategies, contract negotiation, supplier management, analytics etc. Outsourcing procurement to expert third-party service providers allows companies to leverage their deep procurement experience and skills. This helps companies ensure compliance, manage risks better and implement best practices. The expertise of outsourcing partners is thus contributing to higher adoption of procurement outsourcing solutions.
Strength: The Procurement Outsourcing Market offers opportunities for cost reduction through economies of scale by outsourcing non-core procurement functions to third party vendors. This allows companies to focus on their core competencies. Procurement outsourcing also provides access to global supply networks and expertise which individual companies may not possess. Standardization of procurement processes and spend analysis can lead to improved compliance and greater negotiation power with suppliers.
Weakness: Dependence on third party vendors for vital procurement functions can pose risks if suppliers do not meet expectations. Transitioning from in-house to outsourced model requires process re-engineering which may disrupt operations initially. Outsourced contracts may lock companies into long term commitments, reducing flexibility. Loss of control and visibility over direct procurement processes.
Opportunity: Emerging industries and growth sectors offer opportunities for third party procurement firms to enhance services to their client base. Adoption of new technologies like artificial intelligence, blockchain and cloud computing opens up new business models. Regional expansion into emerging markets with growing healthcare sectors provide avenues for market penetration.
Threats: Economic slowdowns and funding pressures in the healthcare industry may reduce outsourcing spends. Changing political and regulatory environment across countries increase compliance complexities. Intense competition from other third party procurement firms pressures pricing and service quality.
The Global Procurement Outsourcing Market Demand is expected to witness high growth over the forecast period of 2024 to 2030. The market size is projected to grow from US$ 5.94 Billion in 2024 to US$ 10.32 Billion by 2030, registering a CAGR of 6.5%.
Regional analysis: North America currently dominates the procurement outsourcing market, driven by advanced healthcare infrastructure and presence of major players. However, Asia Pacific is expected to grow at the fastest pace due to rising medical tourism, government spending on public health and growing penetration of health insurance. Countries like China, India and South Korea are emerging as high potential markets.
Key players: Major players operating in the procurement outsourcing market are 3M, Cardinal Health, Smith+Nephew, Genadyne, DeRoyal Industries, Inc., Medela AG, Convatec Inc., MÃ¶lnlycke Health Care AB, PAUL HARTMANN AG, ATMOS MedizinTechnik GmbH & Co. KG, Talley Group Ltd, Cork Medical, LLC, and Devon Medical Products. Leading firms are focusing on geographic expansion, service portfolio diversification and developing technology capabilities to consolidate their market position.
1. Source: Coherent Market Insights, Public sources, Desk research
2. We have leveraged AI tools to mine information and compile it