StudyCorgi Business & Economics

The Benefits of Outsourcing Operations: ADPC and Teraji Case

Abstract

The Abu Dhabi Ports Company is currently experiencing an upsurge in maritime traffic. The development exerts pressure on its core functions and affects the efficacy of non-core functions like procurement. The overall performance of the organisation depends on the collective improvement of the company’s operations. In the current paper, it was proposed that the functions of ADPC’s procurement department should be outsourced to Teraji. It was found that outsourcing is essential in reducing operational costs and improving overall performance at ADPC. The study employed a quantitative and qualitative approach. To this end, secondary and primary sources of information were used. It was concluded that ADPC stands to benefit if it outsources the aforementioned operations to Teraji. The reason is that Teraji has a proven record of efficient procurement in the market.

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Introduction

Overview

Outsourcing involves the process where one company contracts another firm to provide services or goods that are not core to its business operations. In light of this, procurement outsourcing can be viewed as the situation where purchasing and other services involved in procuring inputs is carried out by an external agent on behalf of another company. There are various reasons why business organisations opt to outsource some of their operations. For example, the process allows the firm to concentrate its resources on its core business. As a result, outsourcing is seen as one way of enhancing the efficiency of the organisation. Another reason is that contracting another company to provide non-core services may be cheaper for the firm than engaging in those undertakings. As such, the profit margins of the outsourcing firm are increased. In addition, the contracted organisation may be experienced in the provision of the outsourced services. The development improves the quality of services offered by the contracting entity.

The current study examines the benefits of outsourcing in a company operating in the Middle East. The analysis revolves around Teraji, which is a leading procurement company in the region. According to Huber and Minahan, a comprehensive assessment of the operations undertaken by such procurement firms allows a company to make an informed decision before outsourcing (5). In this case, the organisation that intends to outsource its procurement operations is Abu Dhabi Ports Company (ADPC).

Background Information

The process of outsourcing procurement operations requires insight into the general framework of this undertaking. To address this objective, the current study primarily investigates the need to outsource. The investigation is made with reference to ADPC, which is experiencing an increase in maritime activities. The increased maritime undertakings have exerted pressure on the core operations of the port. The situation has led stakeholders to explore whether outsourcing some non-core functions is a viable option for the company or not (Huber and Minahan 3). To this end, Teraji is regarded as the suitable company in terms of procurement outsourcing. However, a conclusive decision can only be realised once an assessment of Teraji’s efficiency has been conducted to determine its merit.

It is important for ADPC to consider outsourcing its procurement activities to an external agent. The reason is that procurement plays an important role in the operations of the company. It supports the core competencies of the organisation. AlHammadi argues that procurement is not regarded as a core function in many organisations, meaning that it can be carried out by another firm (7). In addition, ADPC is largely a logistics based company, making procurement a subsidiary role. Nonetheless, the process remains an important function in the company as it is one of the activities that take place in all the three-core competencies.

Procurement processes tend to be very complex by nature. Given that they are not core to the running of the organisation, they may impede the overall performance of the company. The best way through which ADPC can focus on its primary goals involves outsourcing the procurement functions as suggested in this report. In light of this, the current research undertaking seeks to investigate the feasibility of outsourcing ADPC’s procurement operations to Teraji Services.

In procurement outsourcing, a company transfers all (or a major part) of its logistics functions to third party companies (Huber and Minahan 3). In this case, Teraji acts as the third party entity in reference to the procurement functions carried out on behalf of ADPC. The primary objective of this form of outsourcing is to cut down on operational costs. Huber and Minahan argue that the undertaking is essential to the running of an organisation as it gives the company the opportunity to concentrate on other important business operations (3). The core operations of a company like ADPC are measurable. The efficiency of such activities depends on the company’s ability to effectively manage its fleet in all commercial seaports around the world. As a result, it is necessary to outsource some of the activities that are not closely related to the organisation’s key performance indicators.

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The major functions of ADPC involve swift response to maintenance, refurbishment, and improvement of all the ports under its jurisdiction. Considering the size and capacity of the ports in Abu Dhabi, such operations are extremely strenuous to the company involved. They may drain the resources of the organisation if they are not properly managed. Such operations also require high levels of procurement and inventory management. Jaunie argues that in such situations, the procurement and inventory operations mentioned earlier become supplementary activities (4). Such operations can be carried out by a third party as envisioned in the intended outsourcing program to Teraji.

ADPC can only effectively focus on its core operations by contracting a third party to handle its procurement activities. The contracted company should be a reputable and formidable entity in the procurement field. Such a company should be capable of carrying out the outsourced operations using modern technology. Teraji is an electronic marketplace that facilitates real time trading between different companies. The transactions between the various parties are conducted over the internet. Teraji has an experience of more than ten years in internet procurement and offers excellent services to many companies located in the Arab Gulf (AlHammadi 45). In addition, the company offers extensive internet based procurement and logistic services to its clients. A recent market survey indicates that over 100000 clients are currently using Teraji’s internet-based purchasing systems. As a result, the company is well known for its honest, cost-efficient, and excellent procurement procedures.

When ADPC outsources its procurement activities to Teraji, it will get more time to focus on its core operational activities. The management will be able to channel the resources available to the company into these core undertakings. As already mentioned, procurement is a major element that is need for ADPC to accomplish its core operations. Kalakota and Marcia argue that sourcing for goods and services regarded as more of a secondary than primary operational function (90). Nonetheless, the activity is an important driver of the company’s success. Consequently, there are no considerable risks associated with outsourcing the procurement operations of Abu Dhabi Ports Company to Teraji.

Thesis Statement

Over the past number of years, Abu Dhabi’ economic growth has put a strain on the management of the country’s fleet of ocean vessels. The companies operating in this sector have experienced tremendous growth as a result. According to Kalakota and Marcia, it is important for organisations in the maritime industry to focus on accomplishing their core competency activities (10). Huber and Minahan refer to procurement as an element of company logistics (2). Huber and Minahan are of the opinion that sourcing for inputs can be considered as a non-core activity in a firm (2). When a company focuses on such activities, it ends up straining put a strain on its resources. As a result, the overall performance of such an organisation is affected negatively. The thesis statement adopted in this study revolves around this reality. To this end, the author of this paper holds that outsourcing of procurement activities improves the overall performance of a given company.

Rationale for ADPC’s Outsourcing of its Procurement Operations

The major functions of ADPC, as mentioned earlier, involve the maintenance and development of seaports around the country. Functions like customer care, procurement, and marketing may be regarded as essential operations informing the performance of the firm. However, these activities are not at the centre of the company’s operations. On the contrary, they revolve around the periphery of ADPC’s commercial undertakings. In light of this, Huber and Minahan recommend that such non-core operations should be outsourced to third parties (3). Such a move has the potential to improve the company’s overall performance. Increased maritime activities in the region imply that expansion and such other functions are inevitable. As a result, it is important to outsource to save the resources that can be used for the intended expansion.

The effective implementation of the proposed outsourcing program will ensure that Abu Dhabi Ports Company maximises on its resources. Wastage will be curbed as the organisation will be able to focus on other activities. As a result, the company’s core operations of will be enhanced (Jaunie 4). In essence, outsourcing of procurement activities will enable ADPC to realise its intended growth objective in the future.

It is noted that fleet flow in Abu Dhabi has increased with the expanding economy of the nation. As a result, the management of ADPC should put in place measures to improve the company’s performance. The aim is to ensure that the organisation can effectively handle the increased businesses in the ports. One of the ways to achieve this is to ensure that the company limits its key performance indicators to the available resources (Kalakota and Marcia 56). To this end, ADPC should contract third parties to handle some of the activities that are time consuming on its behalf. Evidently, the procurement department appears to be one of the major agencies involved in non-core activities that can be handled externally at less costs to the company. Teraji has a wide presence in the Middle East and other regions. As such, it is best suited to provide the outsourced services.

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Objectives of the Study

The current study has one major objective and two specific objectives. The specific objectives are used to accomplish the major goal of the paper.

Major objective

To analyse how ADPC stands to benefit by outsourcing its procurement operations to Teraji.

Specific objectives

    1. To illustrate the importance of outsourcing.

To achieve this objective, the study will analyse existing literature on outsourcing and present the benefits and costs associated with such an undertaking. Depending on the needs identified at ADPC, the specific importance of outsourcing to this firm will be outlined. According to AlHammadi, contracting third parties to provide functional activities is necessary if a company stands to benefit from the process (12). Consequently, the importance of outsourcing with regards to ADPC will be highlighted in the paper.

    1. To determine the efficiency of Teraji as the preferred company to outsource to.

Teraji will be assessed in terms of its procurement capabilities. The study will examine existing literature on the performance of Teraji in previous outsourcing contracts. After a thorough analysis, the necessary recommendations will be made to ADPC in relation to the suitability of Teraji.

Research Questions

Any research undertaking should respond to the objectives identified for the study. According to Creswell, structured research questions are important in addressing the said objectives (170). In point form, the following are the questions formulated for this study:

  1. What is implied by outsourcing?
  2. What are the different kinds of outsourcing?
  3. Does ADPC need to outsource some of its operations?
  4. What operations require outsourcing at ADPC?
  5. What companies are best suited to handle the operations to be outsourced by ADPC?
  6. How efficient is the proposed company in handling the outsourced operations?

Structure of the Paper

The study has five chapters. The first chapter is the introduction and it lays the foundation for the orientation of the study. The literature review is covered in the second chapter. In this section, fundamental aspects of the study are illustrated based on the findings made in previous studies in this field. For instance, the overall benefits of outsourcing and the track record of the selected company are analysed. In the third chapter, a presentation of the research methodology is laid out. The research design is clearly outlined.

In the fourth chapter, the results of the study are presented. The findings are presented together with discussions on the same. The final chapter incorporates the recommendations made regarding the efficiency of Teraji. The recommendations are intended to help ADPC to make an informed decision with regards to the proposed outsourcing of procurement operations. The chapter concludes by providing a rationale for outsourcing and how it can be used in other companies.

Chapter Summary

Chapter one is an introduction of the research to be carried out in this paper. The chapter begins by providing background information on the research involved. Details touching on the viability of outsourcing operations on the part of ADPC are outlined. In the background section, an outline of procurement and potential to outsource is provided. Further, a link between ADPC and Teraji is established. The idea is to illustrate the importance of contracting external agents on the part of ADPC while portraying Teraji as a suitable option for the same. In addition, chapter one outlines the problem statement where the actual need for ADPC to outsource is highlighted. The objectives of the study are provided in this chapter.

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The next chapter is a literature review. The findings made in previous studies touching on the subject matter are reviewed. The literature review builds on the research to be conducted in this paper.

Literature Review

Overview

There is an expansive database of literature touching on outsourcing in general and among maritime companies in particular. According to Huber and Minahan (2), external contracting is an effective way to cut down on operational costs without affecting the overall quality of service delivery in a given company. In this section, an insight into the world of outsourcing is provided. The intention of this literature review is to determine the suitability of Teraji as a suitable firm for procuring on behalf of ADPC. According to Huber and Minahan, the selling point of procurement outsourcing involves the effectiveness of the company in handling e-procurement (5). To this end, e-procurement and Teraji’s capability to carry out these functions are outlined with the help of the available literature in this field. The literature review will also help to highlight the major benefits associated with outsourcing among companies that have done it in the past.

Outsourcing: A Brief Summary

There are instances where an organisation finds it necessary to contract another company to carry out some of its operations. AlHammadi refers to such a business proposition as outsourcing (10). Under such contractual terms, the company awarded the tender has its own workforce who carry out the operations in reference. In most cases, the contracted organisation is a specialist in the particular area of outsourcing. In their study, AlHammadi found that outsourcing is regarded as an independent niche in the market (10). AlHammadi observes that some industries record higher instances of contracting external agents than others (10). For example, companies that outsource services are mostly those involved in information technology and human resource management. Tibbo (as cited in AlHammadi) points out that engaging a third party is also a common phenomenon among businesses that have large facilities, such as those operating in the healthcare sector (10).

In most cases, the companies involved in outsourcing contract external operators to provide services related to customer care. Lin, Pervan, and McDermid are of the opinion that most organisations lack employees skilled enough to deal with the provision of customer care services (166). Consequently, the customer care aspect of business operations is outsourced to companies with an excellent track record in this field. Plunkett Research (as cited in AlHammadi) found that third party contracting is a common phenomenon in most mid to large sized enterprises (11). Such companies are interested in making sure that their core operations are not affected by fringe activities, creating the need for outsourcing.

As already mentioned, companies that outsource do so based on the need to increase their performance in main operations. Cole and Stratton (as cited in AlHammadi) carried out a survey in London to determine the impacts of outsourcing on companies (4). Most of the organisations included in the survey were operating in the information technology sector. The study revealed that 4 out of the 7 firms surveyed recorded increased sales after outsourcing their call centres. From the studies cited above, it becomes clear that contracting third parties is one of the best ways of improving the company’s overall performance.

Types of Outsourcing

Engaging the services of an external agent is a construct of contemporary business world that can be broken down into different categories. Quayle (as cited in AlHammadi) carried out a study to find out the effects of outsourcing on different firms (23). In the course of the study, Quayle found that this procedure is a structured concept with different classes. Figure 1 is an illustration of the types of outsourcing available:

Types of outsourcing.
Figure 1: Types of outsourcing. Source: AlHammadi (32).

As illustrated in figure 1, outsourcing has three main categories. AlHammadi suggests that the undertaking can be determined depending on location, depth, and work involved (32). For example, a company can decide to outsource given operations depending on the location where the services are needed or where they are generated from. Such activities can either be carried out within the precincts of the company (onsite) or elsewhere (offsite). Notwithstanding the location selected, the outsourcing company retains its workforce. Their employees are separated from those of the contracted firm.

Powers (as cited in AlHammadi) found that offsite outsourcing can further be categorised into three (32). The three are onshore, near-shore, and offshore outsourcing. Powers found that onshore type of outsourcing was beneficial in a number of ways. For instance, AlHammadi holds that problems related to cultural barriers are avoided when onshore contracting is adopted (32). In addition, AlHammadi found that the variance in geographical locations brings about time zone related challenges (32). Onshore outsourcing overcomes these shortcomings. Lin et al. argue that most Middle Eastern Companies prefer this form of outsourcing (167). To this end, Teraji’s capabilities to carry out onshore outsourcing make it an ideal choice for ADPC.

The second category, as illustrated in figure 1, is depth-based outsourcing. While analysing the importance of outsourcing, AlHammadi found that this form of external contracting can be further categorised into three (33). The categories are based on competency, individuality, and functionality of the process. Companies carry out their operations through different departments. The individual type of outsourcing is noted when the organisation decides to outsource the person who runs a particular department. According to AlHammadi, companies like Etihad and Jumeirah have outsourced individual heads, bringing about positive results (33).

When a company decides to outsource a functional department like procurement of IT support, such a move can be referred to as ‘functional outsourcing’. To illustrate this element, Huxley and Morntes (as cited in Lin et al.) carried out a survey on the efficiency of maritime operations in Singapore (179). They found that one of the reasons behind the country’s efficient maritime sector is the outsourcing of container freight services. According to Huxley and Morntes, Maersk, one of the world’s most popular logistics company, was contracted to handle containers in the country’s sea ports. As a result, the Singaporean Port Company was able to effectively handle the core berth operations. ADPC can adopt such a functional form of outsourcing. The move will enable the company to concentrate on its core functions. The other type of outsourcing, which is referred to as work, has 2 categories. It is illustrated in figure 1 above.

E-Procurement in Maritime Business

Overview

Efficiency in contemporary business landscape has received a major boost from the emergence and subsequent advancement of the internet. According to Jaunie, “today, the emergent ideas, connected with quality, responsiveness and the elimination of waste, have focused attention on the supply-chain, and hence on supply” (p. 14). Jaunie points out that the procurement department in most large organisations has some value addition connotations (14). The term ‘procurement’ can be loosely defined as the purchase of goods from a supplier. Jaunie argues that process also includes the logistics involved in the transportation of the said goods and their handling while in storage (14).

E-procurement involves the use of technology to facilitate the process described above. In a study to examine chain management and procurement, Chaffey (as cited in Jaunie 15) provides a working definition of e-procurement. Chaffey defines the concept as “the electronic integration and management of all procurement activities” (Jaunie p. 15). The activities referred to in the definition include purchase request and authorisation. They also involve placing orders, making deliveries, and ensuring that all payments (between the supplier and the purchaser) are settled. When settling for an outsourcing company, one of the factors taken into consideration is their technological base. E-procurement is considered as an advanced form of technology.

The concept of e-procurement is associated with a number of characteristics. As the name suggests, the system operates purely on electronic media. Jaunie outlines the essentials of e-procurement by making reference to Electronic Data Interchange (EDI) applications (14). The applications are regarded as the earliest forms of electronic procurement. Features like the internet and advanced software have made this form of sourcing a more flexible and affordable alternative. AlHammadi gives examples of companies that have adopted in-house e-procurement systems (54). Such organisations include Rolls and HP. Teraji, a leading company in the procurement industry, is also one of the companies that have adopted the e-procurement system.

Benefits of e-procurement

A number of studies have found that e-procurement is associated with various benefits. The implication is that an organisation stands to benefit variously from the adoption of this form of sourcing. Jaunie argues that most of the literature on such benefits covers the wide areas of chain management and logistics (43). The advantages of e-procurement are attributed to the efficiency and effectiveness of this method. According to Kalakota and Marcia, this form of procuring is regarded as efficient due to the following reasons:

    1. It has faster time cycles compared to other methods.
    2. It helps in the reduction of unauthorised and unwanted purchases.
    3. It cuts down on procurement costs.
    4. It helps the company to coordinate all the systems associated with procurement.

The effectiveness of e-procurement is brought about by a number of factors. For instance, it leads to increased control over a company’s chain supply mechanism. In their study, AlHammadi provides more insight into the effectiveness of e-procurement (45). AlHammadi hypothesises that this form of sourcing has an effect on management (45). After examining five companies in the Middle East, AlHammadi found that e-procurement allowed for a proactive management of information relating to all procurements carried out (45). E-procurement has a valuation element that helps companies to acquire the best equipment for their operations.

Procurement outsourcing companies make use of e-procurement systems to enhance the quality of their client’s functionalities. In a study by Kalakota and Marcia, it was observed that companies resort to outsource procurement to improve the processing of the related information (88). AlHammadi holds that there is an emerging trend in the Middle East where companies and governments are sourcing out certain functional operations (45). The factor behind such undertakings is the inability of the said organisations to efficiently and effectively handle large volumes of procurement related information.

In general, e-procurement ensures that the purchasing process is streamlined. Huber and Minahan cite the port of Singapore as an example of how a streamlined purchasing process hastens the entire procurement cycle (4). Sourcing out procurement operations to a company with e-procurement capabilities reduces administrative costs. Companies like Total and HP have realised the benefits of e-procurement. Organisations like ADPC should follow suit owing to their lack of capacity to handle procurement on their own.

The Competency of Teraji in Relation to Procurement Outsourcing

Companies that involved in procurement outsourcing are required to meet certain criteria set out by their clients. AlHammadi argues that the first consideration made with regards to the selection of a procuring company involves its financial capabilities (56). Jaunie evaluated leading companies in the industry to illustrate this point further (56). Teraji is one of the companies whose impacts in the area of procurement outsourcing cannot be ignored. In their study, Jaunie found that Teraji has a presence in 11 countries across the globe (56). The only way a company can spread its operations to this level is by drawing on its financial muscle. An analysis of the company’s financial records revealed that it has over $80 million in revenues.

The strength of a company is determined to a large extent by its financial prowess. Lin et al. argue that in most cases, large corporations have huge procurement demands (171). A company that lacks sufficient operating capital cannot manage the tasks envisioned in the procurement contract drawn by these large corporations. In their evaluation of procurement outsourcing companies, Jaunie found that Teraji has a sound financial record (56). The record was made apparent after a review of an earlier deal entered into between Teraji and Dubai Airports. A separate study by AlHammadi mentions Dubai Airports as one of the busiest hubs in the Middle East region (64). The procurement requirements of such an organisation are equally many. Jaunie credits the success of Teraji in securing the procuring deal to its sound financial backbone (56).

As already mentioned, e-procurement is essential to the operations of a company involved in procurement outsourcing. Huber and Minahan attribute this requirement to technological advances (4). Several studies have intimated on the important role that a company’s technological capabilities play in its operations. Teraji has in the past demonstrated such capabilities in relation to the efficiency and effectiveness of its activities. The study by AlHammadi mentions how the Government of Dubai commended Teraji for its adoption of e-procurement (67). According to AlHammadi, the software employed by Teraji is one of the best in the industry (57). The implication is that the company is up to date with advancements in technology.

The technological advancements notwithstanding, procurement still requires a human interface. According to Jaunie, e-procurement is only as effective as the workforce trained to carry out its activities (43). In relation to Teraji, AlHammadi cites that the company has a workforce of 550 individuals (67). The employees are scattered all over the world. An audit by the Dubai government (as cited in Jaunie) makes reference to the “highly skilled” labour at Teraji (43). Lin et al. suggest that procurement outsourcing deals with large corporations and requires a highly skilled workforce (180). Such a labour force is important as it guarantees the quality of the said outsourcing.

Outsourcing in the United Arab Emirates

The economic might of the United Arab Emirates (UAE) in relation to the global economy cannot be ignored. AlHammadi refers to the region as an important economic hub in the world (19). In 2010, the World Bank estimated that UAE market has a net worth of about $1 billion (AlHammadi 18). Consequently, most of the sectors in the country’s economy have embraced technological advancements to keep up with the growth. Of particular interest is the upsurge in the number of IT companies setting up shop in the region. The increased activity in this sector is attributed to the rise in the demand for both hardware and software. AlHammadi suggests that the technological undertakings in the region may be higher than those recorded in developed countries (19). The realisation has led to the emergence of IT outsourcing.

The progressive growth of the UAE market has made it possible for I.T. outsourcing to thrive in the region. Lin et al. estimates that the country entered into the frenzy of outsourcing as early as 2002 (163). At the time, Lin et al. estimated the size of I.T. expenditure in the region to be more than $200 million (163). The economic boom in this sector was witnessed in 2005 (Lin et al. 163). The increased growth led to an unprecedented increase in I.T. expenditure to the tune of $400 million. The increased business activities in the industry saw clients demanding for better services, necessitating the outsourcing of certain operations.

In the UAE, there is goodwill from the government as far as outsourcing is concerned. Kalakota and Marcia argue that companies operating in the region are obsessed with the provision of high quality goods and services (34). Outsourcing enables various government organisations to focus on their core duties. AlHammadi points out that in 2005, 30% of public organisations in Dubai had outsourced some of their peripheral functions (33). AlHammadi attributes this to the support given by the government to the outsourcing industry (33). For example, His Highness Sheikh Mohammed Bin Rashid Al Maktoum made a decree touching on this form of business operations in 2006. The Sheikh launched the Dubai Outsource Zone (DOZ) to act as the steering body in efforts to diversify outsourcing to other industries beyond IT.

The goodwill demonstrated in Dubai is a clear indication of the fact that the UAE is in full support of outsourcing. AlHammadi argues that the decision to come out in support of this form of trade was necessitated by the findings made in a 2003 study commissioned by the UAE government (37). AlHammadi points out that the study sought to find ways to improve the efficiency of government organisations (37). The study made reference to the success of organisations in Hong Kong (AlHammadi 37). It was found that firms that outsourced their operations in Hong Kong recorded improved performance.

In the UAE, the DOZ secretariat has encouraged authorities in cities like Abu Dhabi to diversify their outsourcing priorities. Jaunie suggests that organisations like the Dubai Airport and the ADPC need to focus on their primary operations, involves handling the increased traffic in passengers and goods (27). To this end, diversification of outsourcing operations becomes necessary. In their study, Jaunie examines the nature of operations sourced out to other agents (27). Jaunie found that Dubai Airports opted for functional outsourcing in relation to its procurement department. The move led to improved service delivery and efficient handling of inbound cargo. At the same time, non-essential purchases were avoided, making the firm’s procurement procedures to be some of the best in the region.

The Shortcomings of E-Procurement

As already indicated, e-procurement has a number of benefits which make it an ideal model for the advancement of procurement outsourcing. However, some studies have highlighted the shortcomings of this process in a bid to caution players in the chain management fraternity. According to Chaffey (as cited in AlHammadi), an assumption that all organisations are e-enabled is erroneous (30). There are companies that conduct redeployment of redundancy in a bid to meet the e-requirements.

The internet is full of mistrust. In a survey carried out among small and medium sized enterprises in Qatar, several concerns pertaining to trust were raised. According to AlHammadi, e-platforms pose major security concerns (30). Key among them is the problem associated with the verification of an organisation’s identity. One may be dealing with a fake company. Such security concerns restrict companies from adopting an e-procurement system. Consequently, such organisations are restricted to the redundant ways of procurement.

Companies introduce systems and policies that will yield great returns. However, Talluri (as cited in Lin et al.) highlights the need to exercise caution when investing in an e-procurement system (167). According to Talluri, such a system is quite expensive. Consequently, a company may not achieve significant returns on investments given that procurement is not a core operation. It is one of the reasons why procurement is a suitable candidate for an outsourcing venture. The contracted firms will make it their core activity.

The introduction of e-procurement in an organisation requires the model to be integrated with the company’s internal financial systems. The study carried out by AlHammadi found that the major impediment to e-procurement involves the complexity of realising this integration (67). The complexity justifies the need to outsource these functions. Introducing the automated system reduces the need for a human interface. Consequently, consumers’ confidence in the system will wane due to their dependency on a human touch.

Further Research

Procurement outsourcing is an expansive academic field. Most of the studies covering this topic focus on the rationale behind this undertaking. Kalakota and Marcia argue that most companies carry out studies on this subject as a speculative measure (195). Such studies are conducted when organisations feel the need to reduce certain operational costs. As such, the motivation is not the need to enhance the efficiency of this industry. Research is required at a stakeholder’s level to promote outsourcing as a business principle rather than the reserve of a few companies. Such a move is akin to the illustrated goodwill gesture from the UAE government.

Research should be carried out on other types of outsourcing. According to AlHammadi, most studies in this field largely focus on functional outsourcing (110). As previously mentioned, this form of outsourcing involves a situation where the operations of a department are source out. An example is the procurement department whose activities form the central part of the current study. AlHammadi argues that the intentions of outsourcing an entire department can be met by sourcing out an individual, rather than the whole division (110). For instance, a company can outsource the head of a given department and retain the workforce at the same time. Unfortunately, information on the benefits of such a venture is scanty owing to the inadequacies of literature touching on the subject.

Chapter Summary

The literature review provided in this chapter was used to examine a number of details touching on outsourcing. The general framework of external contracting was provided and the necessary definitions outlined. The chapter also highlighted the various types of external sourcing and defined the category under which procurement outsourcing lies. The literature review also highlighted the state of outsourcing in the UAE. In this section, calls for diversification of this process in the country were made. The review further examined e-procurement and its benefits to the outsourcing industry. The findings from various studies pertaining to the performance of Teraji in the outsourcing business were analysed. The shortcomings of e-procurement were identified as grounds for companies to resort to outsourcing owing. Finally, proposals for further research were made. The next chapter will highlight the research methodology employed in the study.

Research Methodology

Overview

In this chapter, details touching on the research design are outlined. Creswell highlights the importance of a research design to any academic undertaking (17). The methodology selected depends on the study problem at hand. In this chapter, the sample size and the demographics of the study population are clearly illustrated. A questionnaire is developed to collect data.

Research Design

The study assumes both a qualitative and quantitative research design. According to Creswell, it is possible to have a research undertaking with the two approaches mentioned (21). A research design that adopts the two methodologies is needed when the intention is to test a hypothesis or affirm a given thesis statement. Such a research design is usually objective, making it suitable to a study like the one carried out in this paper.

Qualitative and quantitative methods are elements of research that can be associated with exploratory study designs. In the current research undertaking, the author settles for the exploratory research design. Creswell argues that the same is essential in studies where information surrounding the topic is scanty (17). The study also assumes a systematic approach to data collection by adopting qualitative elements of research. However, the data collected will retain the descriptive element envisioned in this paper.

In the literature review section, a systematic and descriptive form of data collection is illustrated. According to Creswell, such methods of data collection are often used in cases where primary sources of information are not available (33). Under such circumstances, secondary sources of information like journals and books are relied on. In the literature review section, previous studies on outsourcing and procurement were outlined. From the secondary sources obtained, the researcher was able to respond to the objectives of the study. In essence, the need to outsource and the efficiency of Teraji as a procurement firm were illustrated.

From the proposed research design, it is apparent that the study has two phases. The first phase was carried out in the literature review section where information pertaining to outsourcing in general was discussed. According to Creswell, the literature review forms the basis on which primary research is carried out (17). The need for a company to outsource and the efficiency of a suitable contracting company formed the foundation of the second phase of the study. According to Creswell, literature reviews are inadequate as they fail to exhaust the particulars of a study (20). For this reason, the second phase of the research undertaking involves the administration of questionnaires. The data obtained from the respondents is essential in advancing the thesis statement.

The two sources of information (primary and secondary) are essential in any exploratory research undertaking. Creswell argues that secondary sources guide the conduction of primary research (11). When it comes to primary sources of data, Creswell proposes the use of suitable research instruments like questionnaires and interviews (19). The benefit of using such instruments is the credibility they bring to any research undertaking (Creswell 17). The use of a questionnaire allows a researcher to have an in-depth understanding of the sample population.

In the current study, questionnaire was the instrument used for primary data collection. According to Creswell, such tools are prone to errors. For instance, participants can provide false information (35). To overcome such problems, the respondents used in the study are selected depending on their importance to the study. To this end, the current study used participants who are employees in organisations that have undertaken procurement outsourcing in the past. In addition, the participants used were familiar with Teraji and ADPC. Such employees are unlikely to provide false information to the researcher. They are professionals in their fields and it is assumed that they understand the importance of the current research undertaking.

Scope

As mentioned earlier, the study was carried out in the United Arab Emirates. The research focused on the importance of procurement outsourcing to ADPC. Secondary information was gathered from articles and books that address the matter extensively. Most of the participants used in the study were involved in the chain management industry. Terms like procurement and logistics form the basis of the research undertaking. All participants were familiar with these terms considering that they are graduates in this field.

Structure of the Questionnaire

As already indicated, primary information was collected using questionnaires that were administered to a total of 150 participants. According to Creswell, a questionnaire should capture the details of the subject taking part in the study (32). In addition, within the same tool, questions touching on the study should be properly indicated. In essence, a questionnaire should be divided into at least three sections. Creswell suggests that the first section is where the participants fill out their contact information (32). In addition, participants are required to outline their familiarity with the study area in this section. In the case of the current study, the subjects were expected to illustrate their familiarity with the UAE.

The second section of the questionnaire contains a number of questions relating to the thesis statement. According to Lin et al., outsourcing has certain connotations attached to it (163). The questionnaire takes this into account by clustering some of the reasons why countries and companies engage in outsourcing. The element is captured in a series of 5 questions. The following are the issues covered in this section of the questionnaire:

    1. What is the importance of procurement outsourcing to an organisation?
    2. Why does ADPC need to outsource its operations?
    3. What are the advantages of procurement outsourcing?
    4. Does ADPC require infrastructural development?
    5. Does ADPC require improved service delivery?
    6. Does ADPC require a reduction in operating costs?

Each of the issues raised above was catered for by 2 questions. The first question was used to determine the frequency of the factor’s occurrence. The second question was used to highlight the extent to which the delay affects the project. It is important to mention that the frequency of occurrence and the severity of the reasons for procurement outsourcing are based on 4 parameters. The four are listed below:

    1. Always
    2. Often
    3. Sometimes
    4. Rarely

Similarly, the severity of occurrence was gauged using 4 parameters. They include:

    1. Extreme
    2. Great
    3. Moderate
    4. Little

The third section of the questionnaire seeks to determine the efficiency of Teraji in carrying out procurement outsourcing. To this end, a series of questions were posed to the participants. The participants were expected to respond to the questions by marking alongside the proposed reasons. The responses were graded on the 4 parameters used in the case for the need for procurement outsourcing. In point form, the reasons listed for the efficiency of Teraji are as follows:

    1. Financial competency
    2. A highly skilled workforce
    3. The technological advancement of the company
    4. The experience of the company
    5. The quality of work done by the company

Objectives of the Study

Before designing the questionnaire used in the study, it was essential to outline the main goals. According to Creswell, the effectiveness of the questionnaire in gathering information relies on the objectives of the study (20). To this end, relevant, concise and efficient questions were formulated. Such questions made it possible to collect the required primary information. The following were the objectives identified in the process of research design:

    1. To evaluate the general notion of outsourcing with special focus on procurement outsourcing
    2. To identify the rationale for outsourcing in any organisation.
    3. To evaluate ADPC and determine the company’s needs as far as operational matters are concerned.
    4. To examine Teraji in order to establish its efficiency in handling procurement outsourcing of large corporations like ADPC

Research Sample

Studies like the one reported in this paper can use either a census or a sample to collect information. According to Creswell, such a selection should be based on time and budgetary concerns (12). After evaluating the various parameters revolving around the current research undertaking, the researcher settled for a sample of 150 participants. The sample size was manageable and the researcher could afford to print out of the questionnaires. Creswell argues that the selection of the sample must be done based on the industry level (12). The participants in the current study were sourced from multinational organisations and other government institutions in Abu Dhabi.

The selection of the sample was characterised by various challenges. Creswell argues that this stage of research faces a number of problems (32). The first challenge faced involved accessing a suitable database to use for the research. The study by AlHammadi recommends the use of the data base held by Abu Dhabi Chamber of Commerce (49). Unfortunately, the organisation requires one to observe a lot of protocols, something that would have delayed the completion of this study. Consequently, this researcher resorted to use information from directories and internet searches to establish potential organisations to be sampled.

34 of the participants were employees of ADPC, while the rest were drawn from various companies within Abu Dhabi. According to Creswell, participants are required to be familiar with the subject matter (32). As a result, before the start of the research, participants were asked three questions. They were selected only if they responded in the affirmative to all three questions. The three are:

    1. Are you familiar with outsourcing procedures?
    2. Are you familiar with Teraji?
    3. Are you familiar with ADPC?

Data Collection Technique

Once the sample group was established from directories and internet companies, e-mails were sent. Creswell argues that a follow up is needed to secure the consent of the participants (36). After meetings with several representatives of the various companies, the researcher was allowed to request the employees to participate in the study. The individuals willing to take part in the study were issued with consent forms in which they indicated their personal details. They signed the forms to affirm their willingness to take part in the study.

The questionnaires were distributed at random since the participants were not assembled at one place. According to Creswell, such random distribution eliminates any chances of biasness in relation to the information obtained (32). Initially, there were 167 participants who took the questionnaires. 123 filled them on the spot, while 43 were to fill them and submit later. However, only 27 out of the 43 returned their questionnaires.

Chapter Summary

In this section, the research methodology adopted in the study was described. It was reported that the current research employed a two-pronged approach in the collection of data. The literature review was presented as the first phase of data collection. In this regard, secondary sources were used to examine the issue of procurement outsourcing. The information obtained formed the basis for the inclusion of primary sources of data. The tool selected for the collection of primary data in the current study is the questionnaire. The questionnaire was used to proposed different scenarios in relation to the rationale behind outsourcing. There was a grading system in which the participants were asked to determine the severity and frequency of the various options outlined. In the next chapter, the results of this study are provided. The findings are also discussed in this section.

Results and Discussion

Overview

The information obtained from the research undertaking responded to the research questions formulated for the study. In light of this, the discussion takes a five point approach. According to Huber and Minahan, procurement outsourcing must be done when the management feels that the move is absolutely necessary to the organisation (3). In addition, it should be carried out after a suitable company has been identified. Teraji has been marked as the suitable company for outsourcing at ADPC. In this section, the efficiency of this company is outlined in terms of its performance in previous undertakings. The needs of the ADPC are outlined alongside the expected benefits of the proposed outsourcing. The discussion will provide ADPC with a preferred model of outsourcing.

The Need to Outsource

The study, through literature review, has established that outsourcing, in general has a positive effect on the operations of the company. According to Huber and Minahan, most companies prefer to increase their profit margin by focusing on core operations (3). In the current study, the participants had a number of perspectives on the same as illustrated in table 1. Interestingly all the participants responded in the affirmative when asked whether there is a need for n organisation to outsource its operations.

Table 1: What are the reasons behind outsourcing?

Response Number of Participants
To increase profits 35
To improve core operation efficiency 63
To improve quality of operations 41
To improve management of procurement records 11

Table 1 indicates that outsourcing is beneficial to an organisation in 4 different ways. In the first instance, organisations opt to outsource some of their operations with the intention to increase profits. Secondly, companies need to outsource non-core operations for the sake of improving the efficiency of the core operations. Also, outsourcing is essential to an organisation due to the improvement of the quality of its operations. Finally, outsourcing is essential in improving the management of procurement records.

As illustrated in table 1, a total of 63 respondents support the view that outsourcing is essential in the improvement of a company’s operations. According to AlHammadi, ADPC is among the many organisations in the UAE which have been overwhelmed by their core operations (20). The increased freight traffic to Abu Dhabi has resulted to an even greater workload of clearing cargo at the port. To this end, such operations as procurement will only slow down the core maritime responsibilities of ADPC. Consequently, it is in their interest to outsource their procurement department so that they may concentrate on maritime logistics and improving upon the same.

The improvement of an organisation’s efficiency is realised once they discover an avenue upon which they can ease financial strain. According to Huber and Minahan, procurement outsourcing has the potential to reduce general operational costs by up to 20% (3). The same is realised through a number of factors. Standardisation, staff rightsizing and process improvement are some of the ways through which procurement outsourcing can reduce operational cost. Consequently, the excess resources can be used for infrastructural development.

In essence, most organizations prefer to make profit in their ventures. Lin et al. posit that many companies are realising the need to improve core efficiency besides just reducing operational costs (162). The same explains the goodwill gesture of Dubai under DOZ. When a company focuses on its core operations they are able to make profits. To this end, it is essential that enterprises understand the need to outsource in terms of improving core operations. In the long run the changes will improve the company.

Efficiency of Teraji

Teraji is a reputable firm in terms of procurement outsourcing. As illustrated in the literature review the company has a diverse portfolio spread over 11 countries (AlHammadi 45). However, the study sought to find out opinions from some of the clients who have a first-hand experience of the company in terms of performance and its record in customer satisfaction. Table 2 is an illustration of the responses to the question of what makes Teraji an efficient procurement outsourcing company. The company’s diverse portfolio was an indicator of the assumed efficiency.

Table 2: What makes Teraji efficient in procurement outsourcing?

Response Number of Participants
Sound financial position 25
Highly skilled personnel 15
Technological advancement 70
Experience 20
Good work ethics 20

Table 2 outlines 6 areas that make Teraji an efficient company of choice, as far as procurement outsourcing is concerned. The first parameter of efficiency is the financial prowess of the company. An analysis carried out by AlHammadi indicates that the company has an annual turnover to the tune of $ 100 million (43). The same explains their presence in diverse places on the globe. AlHammadi argues that companies with sound financial positions are the best placed in carrying out efficient procurement (43). Unfortunately only 25 participants found the criterion of finance as reason for their efficiency.

Teraji has a skilled labour force that totals 600 people. Kalakota and Marcia argue that companies consider the option of outsourcing since the firm in reference is required to have a better workforce (90). Such a workforce is expected to amplify upon the non-core company operations that have been outsourced. Consequently, such a procurement outsourcing company ought to have highly trained staff who will meet the challenge of improving the performance of the operation outsourced. To this end, Teraji was found to have a highly skilled workforce. Azam (as cited in AlHammadi) argues that Teraji has periodic workshops where the personnel are trained on the latest in procurement and chain management techniques (50). As illustrated in table 1, only 15 participants view a skilled workforce as Teraji’s selling point.

Technological advancement is a selling point when it comes to outsourcing, in general. Most clients, who outsource their services, prefer a company that is averse with the technological advancement in the industry. The same is well demonstrated in table 2, where 70 of the participants associated Teraji’s efficiency to technological advancements. In the literature review, an analysis of e-procurement was outlined. Technological advancements in the procurement outsourcing industry are largely in the incorporation of the latest in software and hardware technology. Jaunie mentions Teraji among the leaders in e-procurement and associate their success to the constant conformity with the emergent trends (100).

Teraji has experience, in procurement outsourcing for more than 10 years. Huber and Minahan posit that, given the magnitude of outsourcing that ought to be carried out by a company like ADPC, experience of the outsourced firm is essential (4). Experience is required for one to understand the dynamics of the market like prices and trends. Also, without experience, a company cannot properly integrate all the procurement related data. In addition, an inexperienced firm will not know the best technology to use for the whole procurement endeavour. Notwithstanding the benefit of experience, only 20 participants were in support of the company’s efficiency based on the said parameter. A similar number argued in favour of Teraji’s work ethics affirming their commitment to ethical means of operations.

The Needs of ADPC

When a company gets to a point where outsourcing is a viable option, there are certain objectives the company intends to realise. At ADPC, the increased maritime traffic has far reaching implications for the port that is situated in logistics hub. According to AlHammadi, the UAE is at the apex of economic prosperity (23). Besides oil, the country has curved out a niche in the logistics market. Estimates obtained from the Transport Department of Abu Dhabi (as cited in AlHammadi) indicate a 23% rise in maritime traffic at the ADPC (23). The activity was compared to leading ports like the ones in Singapore and was found to have a significant lead in increased maritime activity annually.

The handling of freight forms the core objective of the operations at ADPC. Kalakota and Marcia argue that, when the core operations of a company are strained, the company would do well to outsource secondary operations (55). An organisation like ADPC has a limited workforce that will deal with the increased maritime activity. Rather than engage more staff to deal with the increased procurement, the company is better off engaging the services of a procurement company with adequate capacity. The primary need at APDC is the easing off of pressure from secondary operations of which procurement is one.

The increased maritime traffic at the APDC implies that that there needs to be infrastructural development to sustain the increased ship numbers. According to Lin et al., whenever a company intends to diversify its resources, reduction of unnecessary expenses is a viable option (165). As already mentioned, procurement outsourcing tends to reduce operational costs by up to 20%. The infrastructural budgetary estimates of ADPC would get a great boost if the company gets to save the monies from the procurement expenses. Upon saving off of financial resources the company can invests in equipment that will enable it maximise its potential.

Large companies tend to be overwhelmed by the unwanted expenditure. According to Kalakota and Marcia, such organisations make purchases which are not essential to the core objectives of a company (88). Also, such organisations are prone to personnel making unauthorised purchases which end up putting a strain on the financial resources of a company. At the moment, ADPC is faced with a challenge of failing to stop unwanted and unauthorised expenditure. Kalakota and Marcia, while pointing out this major flaw in large companies, advocate for continuous audits to determine the culprits (88). However, scenarios like functional outsourcing of the procurement department can save the monies which are lost to unwanted and unauthorised purchases.

Companies experiencing growth require a timely delivery of their desired products. Kalakota and Marcia argue that the increase core operations require a fast delivery mechanism for desired commodities (93). In such cases, an e-procurement framework would suffice. Under such a framework the required items are processed in a timely manner and that ensures the core operations are not inhibited. AlHammadi argues that large corporations like APDU, in the UAE, require an e-procurement alternative to the manual system (33). The ever changing environment of technology implies that there will always be newer software and hardware to ensure speedy acquisition and delivery of items is not interrupted.

Advantages of Procurement Outsourcing to ADPC

The participants interviewed, coupled with the literature review outlined, both indicate to a two tier advantage of procurement outsourcing to APDC. According to Lin et al., a company should only consider procurement outsourcing in the event that the agreement would result in a mutual benefit if not to the outsourcing company’s favour (178). The current situation at APDC presents a myriad of challenges to the intended growth as envisioned in the needs section above. Fortunately, the procurement outsourcing presented by Teraji provides solutions to the needs faced by APDC. The benefits brought to the company are strategic and economical.

Strategic advantages

The application of procurement outsourcing, with the intention of yielding strategic benefits to an organisation, brings about an agility of the company’s core operations. According to Bailey (as cited in Kalakota and Marcia), focusing on one core objective is the surest way to achieve excellence in an organisation (76). The procurement outsourcing envisioned in this study guarantees strategic advantages to ADPC depending on a number of factors. In the long run, the outsourcing of the company’s procurement department will place APDC on a pedestal to compete with leading ports in the world.

As already mentioned, outsourcing of an organisation’s services enables it to focus on the core business. Smith (as cited in AlHammadi) argues that when an organisation is focused on its core business the strategic potential is increased (99). The resources that were otherwise spent on fringe operations are freed and can be used for other purposes. In the case of APDC, outsourcing to a competent firm like Teraji guarantees savings on the operational costs. Consequently, the company can use the saved resources to position itself against competitors by acquiring new infrastructure.

Companies are formed with the core objectives of bringing in returns. According to Jaunie, the introduction of measures like procurement outsourcing is meant to act as a means of cutting down on cost so as to maximise on profit (7). Evidently, Teraji’s effectiveness in procurement outsourcing implies a similar success to ADPC. In the long run, ADPC stands to fair well economically given the savings and reductions in unwanted expenses that will result once the deal is put in place. The economic stability of ADPC translates to the economic outlook of Abu Dhabi given logistics as a key investment of the city.

The economic benefits are realised courtesy of a number of factors. During the literature review, it was established that e-procurement helps to reduce administrative costs (Lin et al. 166). Also, the company, where procurement will be outsourced, has its own workforce. According to Jaunie, outsourcing companies are expected to have their own workforce whose cost should be relatively lower but more effective in comparison to the client company (29). Teraji has a lean but highly skilled workforce. Consequently, the labour costs on the part of ADPC are offset and thereby reducing the administrative expenses.

The proposed procurement outsourcing envisioned in this study could not come at a more opportune time for ADPC. According to AlHammadi the Arabian Gulf is strategic for maritime trade (34). Consequently, infrastructural investments ought to be made towards the same to ensure maximum returns. To this end, organisations like APDC ought not to waste their financial resources on secondary operations like procurement.

Chapter Summary

The current chapter is an avenue through which the results of the primary and secondary data collection are outlined. The rationale for procurement outsourcing is illustrated. Majority of the participants supported the procurement outsourcing since they viewed it a chance for a company to improve its efficiency. Once a company outsources its non core functions it is able to focus on its core operations thereby maximising its performance. The discussions further delve into the efficiency of Teraji in outsourcing. The needs of ADPC are also illustrated in this chapter. Further, the advantages of procurement outsourcing are outlined. In the next chapter, recommendations as to the proposed procurement outsourcing are outlined. The chapter concludes by giving a general overview of the study and the need for further research.

Recommendations and Conclusion

Recommendations

Procurement is an essential component of an organisation’s performance. However, basing on the Abu Dhabi Ports Company, procurement is considered as a secondary or tertiary operation. Kalakota and Marcia observe that, whereas, the said operation might not be core to an organisation, neglecting it would also be a strain to the company (89). To this end, Kalakota and Marcia recommend a functional outsourcing of procurement (89). Kalakota and Marcia, on their part, put a disclaimer on the proposed outsourcing citing the loss of jobs (89). The recommendations proposed herein, take into account the pros and cons of procurement outsourcing.

Procurement outsourcing to Teraji

The current study has examined outsourcing in its general and specific entirety. Jaunie, AlHammadi, and Kalakota and Marcia have all mentioned the benefits of procurement outsourcing. The respective studies mentioned make reference to Teraji where the company’s competencies are clearly outlined. Kalakota and Marcia suggest that technological advancement is quite essential in an outsourcing firm (66). The data presented in table 2, further supports this claim. The participants argue that Teraji’s competency in the field of e-procurement make it an efficient company for outsourcing. To this end, the current study recommends that ADPC outsources its procurement department to Teraji owing to the latter’s illustrated eligibility.

Incorporation of workforce

The process of outsourcing services to another organisation has labour related connotations. Lin et al. cite the loss of jobs as a setback to outsourcing in general (168). However, as illustrated in figure 1 there are various categories of outsourcing. The study recommends that a hybrid approach to the outsourcing be adopted. In the first instance, the workforce in the procurement department should be amicably compensated. In the second place, ADPC and Teraji should come to an arrangement in which some members of staff from ADPC are employed Teraji. Lin et al. refers to such an arrangement and argues that it can be done between an in-house and offshore outsourcing framework (168). The study recommends such a move. However, the employees incorporated should not be given financial compensations but given similar contractual terms as their former company.

Procurement objectives

Once the outsourcing is carried out the same does not imply that the company has ceased to be a member of the outsourcing client. According to Kalakota and Marcia, such an arrangement should ensure that the outsourced department retains core values of the parent company (100). For instance, in the implementation of purchases, if the ADPC does not prefer goods from countries with embargoes, then the outsourcing company should respect the said decision. To this end, the study recommends that the two parties to the outsourcing agreement should come up with a memorandum of understanding on the treatment of the outsourced department.

Implementation plan

The success of outsourcing a procurement department is dependent upon the parent company and the outsourcing firm’s mutual cooperation. In the opinion of Jaunie, the two parties to the agreement must carry out a joint market analysis to determine the best course of action (97). In the event of changes to be made the same should be carried out based on a proposed roadmap between Teraji and ADPC. Consequently, the current paper recommends a comprehensive dialogue that will yield a suitable roadmap for implementation of procurement strategies. Such a roadmap will avoid any conflict that might arise owing to management preferences. However, the paper further issues a disclaimer that the outsourcing company, being the professionals, should have a bigger say on the matter.

Conclusion

Procurement outsourcing falls into the functional category of outsourcing. The discussions in this paper have illustrated the entire paradigm of outsourcing. Among the benefits of such a paradigm include the improvement of core services. According to Kalakota and Marcia, outsourcing is an avenue through which a company can use to let go of operations that are not central to their objectives (65). Consequently, the outsourced operation gets to be improved upon to ensure the overall performance of the company is increased. In the paper, APDC requires outsourcing and its procurement department is ideal. Teraji, a leading procurement outsourcing firm, is proposed as the ideal company to offer outsourcing solutions to APDC.

The current business climate in the Middle East and in the entire world by extension is going for optimisation. Lin et al. argue that optimisation entails the maximisation of the core duties of a given company (170). To this end, APDC stands to benefit in terms of strategy and economics from the proposed outsourcing. On its part, Teraji has the necessary financial capital and skill levels to ensure a sound management of the outsourced department. Companies that intend to broaden their presence require shedding off non-core operations.

In conclusion, procurement outsourcing is seen as a departure from the traditional customer care kind of outsourcing. According to Kalakota and Marcia outsourcing requires diversification (47). There needs to be further research on the subject of procurement outsourcing especially in the other categories of outsourcing. Outsourcing should not be seen as a means to cut costs and make profits only. Rather it should be regarded as an avenue through which companies can get to improve on the quality of their operations.

Chapter Summary

In this concluding chapter, the finer details are outlined. Proposals for the procurement outsourcing are made as the recommendations. Further recommendations are made to ensure the well being of the staff that might lose their jobs. In this chapter a proposal to have the two parties develop a procurement proposal are outlined. Most of the recommendations made in this chapter come against the backdrop of ensuring that the core activities of ADPC are improved upon. To this end, the proposed procurement outsourcing to Teraji is in the best interest of ADPC.

Works Cited

AlHammadi, Huda Mohamed. IT Outsourcing in Government Organisations in United Arab Emirates. Diss. The British University in Dubai, 2009. Print.

Creswell, John. Research Design: Qualitative, Quantitative, and Mixed Methods Approaches. 2nd ed. 2003. London: Sage Publications. Print.

Huber, Bill, and Tim Minahan 2012. Procurement Outsourcing: Not an All or Nothing Value Proposition. PDF file. Web.

Jaunie, Charles. International Cross-Border Study on the Potential Strategic Opportunities for Irish and French Manufacturing SMEs to Use E-Procurement. Diss. Dublin Business School, 2007. Print.

Kalakota, Ravi, and Robinson Marcia. E-Business 2.0: Roadmap for Success, Ontario: Addison-Wesley Professional. , 2000. Print.

Lin, Chad, Graham Pervan, and Donald McDermid. “Issues and Recommendations in Evaluating and Managing the Benefits of Public Sector IS/IT Outsourcing.” Information Technology & People, 20.2 (2007): 161-183. Print.

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StudyCorgi. (2021, February 18). The Benefits of Outsourcing Operations: ADPC and Teraji Case. Retrieved from https://studycorgi.com/the-benefits-of-outsourcing-operations-adpc-and-teraji-case/

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