Save money on the company's procurement

Procurement is responsible for the company’s expenses. For a company it’s important to keep the expenses as low as possible. Saving money on the procurement is interesting for every company. In this blogpost we’ll explain one way to save money on the procurement. 

The difference between direct procurement and indirect procurement 

Direct procurement refers to the purchasing of goods and services that are directly related to a company’s core business. These are the materials, components, and other inputs that are used to produce the company’s products or services. For example, a car manufacturer might engage in direct procurement of steel, rubber, and electronics for use in its vehicles. 

Indirect procurement, on the other hand, refers to the purchasing of goods and services that are not directly related to a company’s core business. These are the goods and services that are needed to support the company’s operations, but are not part of the final product or service that the company offers. Examples of indirect procurement include office supplies, IT equipment, marketing services, and janitorial services. 

In general, direct procurement is more closely tied to a company’s bottom line, as the goods and services that are purchased directly affect the quality and cost of the company’s products. Indirect procurement, on the other hand, is more focused on supporting the company’s operations and ensuring that they run smoothly. 

Outsourcing the indirect procurement

Outsourcing indirect procurement can be beneficial for a company because it can help reduce costs and improve efficiency. Indirect procurement includes the purchasing of goods and services that are not directly related to the company’s core business, such as office supplies, IT equipment, and marketing services. By outsourcing this function, a company can tap into the expertise and resources of a specialized procurement provider, which can help the company negotiate better prices and identify cost-saving opportunities. 

There is a difference between source to pay and procure to pay. Source to pay is a procurement process that involves all the activities from identifying a need for a good or service, to selecting a supplier and negotiating a contract, to making the purchase and paying the supplier. Procure to pay, on the other hand, focuses specifically on the financial aspects of the procurement process, including the creation of purchase orders, thereceipt of invoices, and the payment of suppliers. In other words, procure to pay is a subset of the broader source to pay process.