Billions to be saved by off-shoring procurement
By Staff -- Purchasing, 12/14/2006 2:00:00 AM
A recent report from the Hackett Group found the Fortune 500 could potentially save $58 billion annually, or more than $116 million on average per company, by off-shoring many of their back office activities—including procurement.
According to Hackett, advances in technology, along with increasingly educated global work forces, enable the portability of business support activities in areas like information technology, finance, human resources and procurement.
Hackett’s estimates show the average Fortune 500 company could save almost $10 million a year by outsourcing procurement functions such as purchase order processing and sourcing execution. Those moves would impact, on average, 275 jobs.
Hackett found many companies are relying on outdated sourcing analysis techniques that lead them to materially underestimate the benefit available through off-shoring back office operations. With labor arbitrage savings nearing 60%, Hackett finds that executives must analyze their process optimization opportunities to capture the potential value of centralization.
According to Hackett Managing Director Michel Janssen, “Today, companies can turn to established off-shore resources that deliver labor costs reductions while maintaining or even improving the skill level of staff. The potential savings of up to $116 million annually for a company are simply too compelling to ignore.”
Now Playing: 