By contracting out product manufacturing and packaging, companies can focus on core competences like marketing and product development. Outsourcing also increases return on capital to create shareholder equity.
In procurement, the Kearney report predicts that the number of corporate buying groups will grow fast, especially for purchases of packaging, to pool buying power and gain leverage with suppliers. At the same time, some companies are expected to outsource procurement operations, a la Gillette, so companies won't need in-house expertise to manage purchasing.
Although the terminology is a bit different, this outsourcing is borne out by a survey of W. W. Grainger (Chicago, IL) of 600 corporate purchasing decision makers. Its results show that 22% of medium to large companies (more than 250 employees) employ "integrated supply" arrangement, i.e., a system for continuous materials replenishment. Although there is no defined packaging component in the survey, those 22% report high satisfaction levels that parallel those in Packaging World's Outsourcing Survey (see PW, January '98, p. 35).
