Outsourcing is the complete transfer of a business process to an independent external organisation. The reasons for outsourcing could be due to uncertain market situation at where the company is located, company’s efforts to restructure the process flow of departments, so as to achieve economies of scale as well as efforts to reduce costs from skilled labour to raw materials. Outsourcing can be deemed effective and thus successful when it helps companies to achieve better quality, quantity, delivery, cost, service, lower risk and greater opportunity for the company’s competitive position and greater customer satisfaction.
Categorisation as a Procurement Strategy
Categorisation is a form of category management used in procurement/purchasing. It is a strategy where the Procurement Managers in organisation cluster and centralise similar goods and services. By doing so, it eases administrative procedures and lower prices of goods and services through bulk purchases. Therefore, by applying categorisation strategy, it would be easier for organisation to outsource part of their procurement processes successfully. It would also effectively assist organisations in checking for the performance of their hired outsourced department.
As categorisation is a strategic approach, as a guide, there is an 8 stage cycle on how category management can be conducted in organisations.