In business it’s all about maximize the profits and minimalize the costs. Big companies nowadays not only try to maximize the profits by gaining more sales, but try to reduce the internal costs to. Less internal costs mean more net profit. The department who is the most responsible for the expenses is the procurement. Get grip on your procurement and the internal costs will reduce.
In big companies the procurement is most of the time a big department with a lot of employees. Procurement is such an important department, because there is where the expenses are. Saving on the expenses ensures more net profit. To get enough resources, the procurement has to buy the right amount of goods and services necessary for the business to keep running.
Direct procurement and indirect procurement
You can divide procurement in two:
- Direct procurement
- Indirect procurement
For the company is direct procurement the most important part. The direct procurement consists the procurement of goods and services which directly contribute to the core business of the company. An example of direct procurement, for a car manufacturer as General Motors is the procurement of tyres and batteries. Most of the time car manufacturers as General Motors don’t produce tyres and batteries themselves. They purchase it by their suppliers. Without these parts, General Motors is not able to produce a working car. These parts are necessary for the core business of the company. The ordering process is frequently and that’s the reason why companies already arranged the best prices and conditions for those parts.
Indirect procurement is less important because indirect procurement doesn’t affect the core business directly. Office supplies like a desk won’t affect the core business directly but are indirect still necessary for the company. Without a desk an employee can’t work. Indirect procurement is a hidden treasure. Because procurement hasn’t indirect procurement high on the agenda, there is still a lot to win. Indirect procurement often happens at c-suppliers. These so-called one-time suppliers have their own invoice and payment terms. Controlling all these single invoices and payment terms is very time-consuming and sensitive to errors. That’s why a lot of big companies choose to outsource their indirect procurement.
Outsource the indirect procurement
Outsource the indirect procurement mean you let another company control the purchases and payments of the indirect goods. Outsource the indirect procurement comes with a lot of benefits. First of all, it can save up to 21% of the internal costs. Secondly you won’t receive multiple single invoices with each their own payment terms anymore but just one total invoice with one payment term and one point of contact. This will make you reduce your supplier base up to 80%.
Source to Pay
Optimize your Source to Pay process by outsourcing it. In addition to invoice management and Procure to Pay, with Source to Pay you outsource the tendering process too. Let companies like Corlido consult the market on the basis of the specification provided by your organization and selects a supplier based on the best commercial condition. Corlido will execute the whole process from tendering till payment. Afterwards all those single invoices are combined in one total invoice. This will unburden different departments and can save the company up to 21% on internal costs.