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A well-organised invoice management is important for your company. Many companies choose to outsource their indirect procurement because of time- and moneysaving issues. Outsourcing the indirect procurement can save up to more than 20% on indirect purchasing costs. There are two main types of procurement activities:
In this article we explain the differences between those procurement activities and the benefits for your company. Direct procurementThe meaning of direct procurement is the process of purchasing or obtaining raw materials, resources, goods and services that are indispensable for the core business of the company. After been processed, this goods or services will be sold to the end consumer. For example, if your company produce cycles and you get the tyres delivered by a supplier, this is direct procurement. Indirect procurementUnlike direct procurement, indirect procurement deals with the acquiring of products and services which don’t have an essential role in the core business process. It only supports business operations. For example office supplies. The benefits of outsourcing the indirect procurementBecause the indirect procurement does not have any influence on the core business, but still is time- and money spending, companies choose to outsource them. Outsourcing the indirect procurement brings the following benefits:
With outsourcing your indirect procurement, you can reduce up to 80% of the supplier base. Instead of having a lot of different C suppliers for your indirect procurement, with different invoices and different payment terms you only have one invoice with one point of contact and payment terms. This can reduce your internal costs up to 21%. And that’s the big win for your company. |
Frequently asked questions
What is direct procurement?▼
Direct procurement is the process of purchasing raw materials, resources, goods and services that are essential for your company's core business. These items are processed and sold to end consumers, such as tyres for a bicycle manufacturer.
What is indirect procurement?▼
Indirect procurement involves acquiring products and services that support business operations but aren't essential to the core business process. Examples include office supplies and other operational necessities.
What are the main benefits of outsourcing indirect procurement?▼
Outsourcing indirect procurement can reduce internal costs up to 21%, reduce your supplier base by up to 80%, simplify invoice management with one supplier, and free up time for strategic procurement activities.
How much can you save by outsourcing indirect procurement?▼
Companies can save more than 20% on indirect purchasing costs by outsourcing. Additionally, consolidating suppliers reduces internal costs by up to 21% and minimizes administrative overhead.
Why should companies outsource their indirect procurement?▼
Since indirect procurement doesn't influence core business but consumes time and money, outsourcing allows companies to focus on strategic activities while reducing costs and simplifying supplier management.