Procurement is essentially the process of obtaining materials, supplies, and goods as well as services by one business from another business, through tendering or open and fair competition. In procurement, receiving the highest quality of the products at the best possible price is the crucial consideration. When the business that intends to get the goods or services contracts the services of another company to purchase those goods on their behalf, it is called 3rd party procurement.
Traditionally, most businesses were involved in their procurement activities. In the present time, however, most companies and firms prefer to employ the services of third-party procurement (TPP) companies. When you intend to use the services of a TPP company for your company, you should factor in the advantages and disadvantages. Below are some of them.
Advantages
- It is cost effective. When you employ TPP services, you will not be expected to develop expensive infrastructure to obtain the goods or materials. The TPP service provider will use their means to ensure the products arrive safely at your premises. Moreover, when the procedure you intend to obtain is going to exert unwanted pressure on your resources, you should prefer contracting the services of a TPP company.
- A third party procurement company will have the skills, expertise as well as experience to contract on your behalf. This is especially important when your company lacks the skills or expertise in the nature of the goods that you intend to buy.
- When your company employs a TPP company, your staff will have the opportunity to focus their time and energy on other aspects of the company.
- TPP companies provide you with timely services. Most TPP companies will have the personnel, expertise, and infrastructure to carry out their contractual obligations. The companies usually invest in ensuring that you speedily get your goods.
- If you are obtaining your goods from abroad, the third-party procurement company will handle all the required paperwork and regulations.
Disadvantages
- When you use the TPP companies, you lose control over a critical aspect of the business. The TPP will handle the goods or services that your company will eventually sell to your customers.
- In as much as using the TPP companies appears to be cheap, it may turn out to be more expensive in the end.
- Relying on a TPP company deprives your staff of the knowledge and skills to handle procurement in the company. Should you have a fall out with your TPP company, your business may be stuck until you find a new TPP company.