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Maximize the profits by reducing on procurement

Every company wants to grow and gain as much profit as possible. As company you can achieve more profit in two ways. The first way is to gain more sales, more sales leads to more profit. Another way is by cutting on the internal costs. Getting the same revenue with less costs, means more net profit. There are many ways to cut the internal costs. As company you can save on personnel, but that will bring the other personnel extra workload. You can save on the procurements instead, by outsourcing it. A lot of big companies already outsource parts of their procurements and save a lot of money with it.

Direct procurement and indirect procurement

Procurement is separatable in two main parts:

  • Direct procurement

  • Indirect procurement

Direct procurement is the procurement of goods, services and supplies necessary for the company’s core business. For example, to build a car, a manufacturer needs tyres and a batterie. Most of the time they don’t produce it themselves but order it by a supplier. These tyres and batterie are necessary for the core business of the company, so it’s called direct procurement.

Indirect procurement is the procurement of good, services or supplies which not directly influences the core business. For example, a coffee machine. The company can still produce the car without the coffee machine so it won’t harm the core business. But a coffee machine will be appreciated by a lot of employees. 

Because direct procurement is very important, the company does it most of the time themselves. The already have the suppliers with the best prices and terms. Indirect procurement is not that important. A coffee machine or other office supplies you buy most of the time just once. For those purchases you don’t start a tendering process.

Big companies therefore often choose to outsource the indirect procurement. Outsourcing the indirect procurement saves money and has a lot of other benefits. There is a slight difference between outsourcing the procure to pay or source to pay process.  

Outsource the procure to pay process

Procure-to-pay is the first way to cut the costs. Procure-to-pay is outsourcing a part of the whole indirect procurement process. Instead of order the indirect goods yourself, you leave it to another company. The advantages of outsourcing the procure to pay is that you don’t have to order, monitor, control and pay the invoices from each supplier yourself. Getting one total invoice from one total supplier with one payment term and one point of contact, save a lot of time controlling and monitoring the invoices and the payment terms. This is time-saving and will unburden the financial department. Furthermore, you can reduce your supplier base of those indirect suppliers.

Outsource the source to pay process

In addition to procure to pay, you choose with source to pay for outsource the tendering and selection parts too. When you leave the tendering and selection of the indirect procurement by Corlido, you are assured of the best products for the best prices and the best terms. At the and this can save you up to 21% on the internal costs.