SMEs urged to position for $12-B procurement outsourcing business

Trade and Industry Secretary Juan B. Santos is urging small and medium enterprises (SMEs) to position themselves as outsourcing providers of procurement requirements for multinatonial corporations.

Citing statistics from International Data Corp. (IDC), a global market research and advisory firm, Santos said the procurement outsourcing market is expected to increase at a five-year compound annual growth rate of 15.2 percent to $12 billion in 2007.

The Philippines, he noted, is an ideal location for procurement outsourcing given its unique position as a regional and global business hub.

Santos pointed out that Ford Motor Co., one of the world’s leading automotive manufacturers, has tapped local suppliers for its manufacturing needs.

About 23 percent of Ford products have local content, among them alternators and starters, tires, alloy wheels, batteries, wiring harness, seat components, noise vibration and harshness reduction parts, weather strips, door trims, emblems, horns, brake pedals and parts, seat belts, switchers and tool sets.

The Department of Trade and Industry, through the Center for International Trade Expositions and Missions (CITEM), will hold a two-day forum and outsourcing show called Industry Link 2005 in August 2005 at the Philippine Trade Training Center to establish partnerships among local SMEs and large corporations on strategic material outsourcing and procurement services.

"SMEs should learn to improve their manufacturing capabilities to help mitigate the dominance of imported products in the market," Santos said.

He added that SMEs could continue to attract value by enabling external business to use Philippine resources and skills to complement their outsourcing needs.

The trend in procurement outsourcing, according to Santos, is here to stay and, as it picks up in the Asia Pacific region, local SMEs should pitch for that business.

A report by Gartner Inc says more relatively smaller outsourcing deals — rather than the billion-dollar-plus ones — are now being struck.