Unite | Key steps to tackle process costs in indirect procurement

From employee request to final payment, your multi-step business procurement process can be a time-consuming and costly beast. But it doesn’t have to be that way. Here, we explain how you can streamline procurement and save money by answering the following questions:

What are process costs in procurement and where are they found?
What makes process cost optimisation hard in indirect procurement?
How can we streamline procurement processes to reduce process costs?

What are process costs in procurement and where are they found?

Your procure to pay (P2P) process includes every step from the moment an employee makes a purchase request to the moment your supplier gets paid. And every part of that procurement process has an associated cost – in time, resources, and any associated fees and taxes (or potential discounts) – including the time it takes to find suitable vendors and the time it takes to get a purchase order approved.

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What makes process cost optimisation hard in indirect procurement?

In an ideal world, your business procurement process would be optimised to drive efficiency and keep all these costs as low as possible. But indirect procurement – that’s all the materials and services your business buys that are not a direct part of your value-creation process, but are essential for the day-to-day running of your business – makes cost optimisation harder to achieve.

Indirect procurement generates a high number of vendors and associated orders. A former Unite study found that the average number of vendors for companies (across all sizes) was 1,600. Large organisations can have nearly 10,000 suppliers on their books. The onboarding of each supplier as a creditor, as well as the manual handling of invoices and purchase orders, for so many vendors is a huge administrative burden. This is particularly true for businesses without standardised, digital procurement processes.

A laborious research portion of the process – whereby buyers try to find the best deals and have to manually manage free-text orders – is also hard to optimise. To bypass this lengthy process, many departments resort to maverick buying, using unvetted suppliers to purchase goods and services without centralised approval.

How can we streamline processes to reduce process costs?

These challenges might seem insurmountable, but with the right solution by your side, you can realise significant process cost savings. Here we talk you through five steps worth taking to optimise your indirect P2P process, and explain how Unite can make all the difference.

Procurement professional typing in procurement data into a laptop

1. Go digital

An e-procurement solution makes it easier to digitise your indirect spend across the organisation, optimising your P2P process. This should seamlessly integrate with your existing systems to reduce the number of free-text orders, speed up searching, and lighten the administrative load.

How we can help:

Unite integrates with more than 40 ERP and third-party systems (via OCI or cXML Punchout). It offers instant access to a huge assortment of vetted suppliers, meaning there’s no need for your people to order from elsewhere. You can convert purchase requests into purchase orders automatically and speed up accounting processes thanks to electronic invoices with PO references.

And it’s packed with procurement features, like user management, approval workflows, shopping lists, view management and cross-catalogue search to cut down searching time and avoid long approvals.

Two procurement professional looking at TCO data

2. Harness the power of data

If you don’t know what it’s costing you, you won’t know how much you could save. For example, our research shows that the total cost of ownership (TCO), which includes search time, placing the order in the ERP, receiving and booking the delivery, setting up a new supplier in the system and then paying the invoice, typically costs more than the price of the goods being ordered. From master-data maintenance to internal communication and approvals, the process can cost a few hundred euros per supplier.

How we can help:

We recommend gathering reliable data to get a clear overview of what your process costs are and the potential savings on offer by using our process cost calculator. It lets you see, down to the minute, what using our platform could mean for your bottom line. We’ve calculated that savings of up to 60% are possible, making a budget-blowing difference for many businesses.

Procurement professional pointing at the Mercateo Marketplace on a laptop

3. Sign up for a single creditor model

With such high costs for registering a new creditor and managing suppliers, choosing a system partnership with a single creditor model means that no matter how many businesses you buy from, you only have one account on your books.

How we can help:

Unite covers over 700 suppliers under one creditor. That means no vendor and supplier management, and no master-data maintenance. You can optimise account processing even further, by encouraging your preferred suppliers to join using our single-creditor services too.

Find out how our Single Creditor model freed up time for energy provider EnBW’s accounts department.

Procurement professionals talking about their processes

4. Set up standardised processes

As you scale and grow internationally, standardised processes and clear procurement policies are essential for decentralised procurement to succeed. Solutions that support centralised supplier management help give your procurement professionals oversight, while allowing decentralised teams to exercise autonomy and expertise.

How we can help:

Unite makes it easy to enforce a standardised P2P process. With approval workflows and view management, which hides articles from certain ECLASS product groups, it’s efficient too. And don’t just take our word for it. LGI, a market leader in the logistics industry, loves the streamlined approach. Now their staff can search for what they need from known supplier catalogues and benefit from negotiated prices too.

Procurement professional in a warehouse ordering new supplies with a laptop

5. Put a stop to maverick buying

Maverick buying is the inefficient purchasing of low value, low volume, tail-end goods and services. It’s usually for those basic but essential things a company needs to run, but this type of spending typically falls outside existing supplier framework agreements, causing a number of problems for your business. These include accounting errors, damage to supplier relationships, and impacting your bottom line. With strategic purchasing out the window, you won’t benefit from negotiated cost savings. And with more work for accounting, you’ll drive up administrative costs too.

How we can help:

Our solution can help control tail-end spending, including maverick buying. It allows departments and employees to retain some control, flexibility, and choice over what they buy, while guiding them to preferred suppliers that are already set up on the system and where you have the most preferential terms.

Want to learn more?

Find out more about Unite and discover how we can support your procurement needs.

Stories and insights 09.10.23

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