Tag: procurement outsourcing

Outsourcing services

Have Automation and AI put an End to the Era of Outsourcing Services?

The developed parts of the world have enjoyed lowered production cost and higher profits by outsourcing services from various operations like production and customer service. With countries such as China, India, and Bangladesh being the major outsourcing services hubs due to lower labor rates, companies have been able to lower their cost base considerably. On a similar note, automation and artificial intelligence (AI) have also significantly saved large chunks of the cost for the companies. As a result, many analysts and experts have predicted that the days of outsourcing services will be outnumbered soon enough, with automation and AI eating up numerous jobs. So does the rise of automation and AI bring down the curtain on outsourcing? In this article, we have explained the reasons for this question. 

How Automation and AI Impact Outsourcing Services?

Increasing Cost of Outsourcing Services

Although traditionally companies preferred outsourcing to save on labor costs, today the BPO’s charge higher fee for their services and add markups making those services expensive. Additionally, governments across the world also discourage companies from their outsourcing services and promote employment and production in home country instead. For instance, under the Obama administration, a $200 billion in tax relief and incentives law was put in place, which encouraged American companies to make an investment in their business and create new jobs. Other laws allowed businesses to write off all costs in new investment in equipment in the US.

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Loss of Control

When businesses outsource their operations, they contract the work to other company, which means sharing company details, information, and data. The company will be at the mercy of the BPO. Also, quality and service delivery from the BPOs may vary widely.

Supply Chain and Logistics Efficiency

Outsourcing services of manufacturing and production operations may seem lucrative at the beginning with all those cost savings opportunities. However, businesses may incur unanticipated costs such as hidden fees, import and export duties, shipping costs, haulage, freight costs, legislative costs, and additional taxes. Additionally, due to the complicated logistics network, the time-to-market is also significantrequest proposally increased. Consequently, businesses are looking to manufacture in the home country whenever possible by carrying out make-or-buy decisions.

Automation and AI

The most prominent factor that could signal the end of outsourcing services is the rising popularity of automation and AI. The technology is so advanced that it can eliminate the majority of human errors, and provide a quality output at a faster rate. Automation in manufacturing has been around for a long time. However, AI is threatening to replace service facing operations. For instance, with machine learning and cognitive computing abilities, companies can use chat-bots to solve customer queries and automatically reply to e-mails from the customer.

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Top 5 Trends in Digital Procurement

Procurement activities comprise a significant chunk of an organization’s cost and have a significant impact on the cost of the final product. As a result, organizations are looking for cost-saving measures to remain competitive in the marketplace. Digital procurement offers organizations a streamlined view of all their procurement process by eliminating redundant procurement steps and increasing the procurement process efficiency.

Organizations adopt digital procurement for the benefit it provides such as reducing the purchasing price, optimizing the procurement cost, bringing about internal process optimization, securing supplies, minimizing warehousing costs, and maintaining quality guidelines.

Here are the top 5 trends in digital procurement:

Automation in Procurement:

Automation technologies such as source-to-settle processes, procure-to-pay, e-procurement, and contract management have get in toucheliminated the need for constant human intervention by automating sourcing, procuring, and invoicing processes. With savings in time, even non-procurement professionals can handle the process, and help procurement professionals utilize their time in procurement strategy making. Requisition approvals, automated MRO re-orders, supplier profile maintenance, and purchase-to-pay (P2P) are among the most automated processes in digital procurement

Data Analytics in Procurement

Big data and analytics help the procurement organization to unlock the real value of data by gathering in-depth insights. Big data analytics help save significant time and cost for the procurement organizations by using predictive analytics, trend analysis, risk management, and category management. Applications such as vendor evaluation, spend analytics, and demand forecasting are some of the most popular applications to use data analytics in procurement.

Cloud based Digital Procurement for Small and Medium Sized Businesses

Digital procurement is certain to benefit the procurement organization, but it does come with a hefty price tag? Since digital procurement is moving from being a cost saving tool to a business essential, small and medium sized businesses are also finding ways to reap the benefits of digital procurement. Cloud-based platforms are gaining popularity among these organizations for their budget-friendly attribute.

Dedicated Procurement Systems for Large Organizations

Traditional digital procurement systems were designed with a one-size-fits-all mindset. But with exponential growth in transaction volume and increasing need complexity of each business and suppliers, they demand customized offerings out of these systems. For process efficiency and optimization, large organizations are shifting towards developing their own custom platforms.

Outsourcing it to the Experts

E-procurement isn’t one of the core competencies for many of the organization and may lack expertise in procurement, supply-chain, and logistical challenges. Many organizations now seem more reluctant to leave the complex digital procurement process to the experts and instead prefer outsourcing all their processes to ensure the smooth operation of the business.

Digital procurement is gaining popularity among procurement organizations with an increasing adoption rate. The future for digital procurement would be data driven, and organizations would have to adapt to a high level of automation so that their experts can focus their time on value-added strategic tasks.

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