Every employee of a big company responsible for the financial department knows the struggle with the supplier base. Big companies order a lot and have a lot of different suppliers, each of these suppliers is a creditor in the supplier base. Most of these suppliers aren’t frequently suppliers but just one-time suppliers. Not every company is already familiar with how to reduce their database, but after reading this article, you wished you knew it a long time before, because it comes with a lot of extra benefits.
The supplier base
The supplier base consists of all the suppliers the company ever used. In general, you can divide these suppliers in two groups:
- Suppliers for direct procurement
- Suppliers for indirect procurement
Direct procurement is the procurement of raw materials, goods and services which are important for the company’s core activities. Without the procurement of these raw materials, goods and services the company is not able to produce their product or service. Most of the companies already have built up a long-term relationship with these suppliers. They already have the best commercial conditions. The procurement at these suppliers is frequently and important for the core business.
At the other hand, you have indirect procurement. This is procurement of materials, goods and services which are not important for the core activities of the company. With indirect procurement you place orders at suppliers you don’t order frequently at but most of the time just once or twice. An example of indirect procurement is the procurement of office supplies. The procurement of office supplies won’t influence your core activities. Therefore the indirect procurement is most of the time undervalued. Controlling and paying all those different invoices and payment terms takes a lot of time and is very sensitive for errors. For each of these suppliers you have to make a creditor. Before you know it, the supplier base is mostly filled with these one-time suppliers.
The solution: Outsource the indirect procurement
The solution is easy, outsource the indirect procurement. When you choose to outsource the indirect procurement, you can easily reduce the supplier base up to 80%. Instead of placing orders at all those different one-time suppliers yourself, you leave it to specialized companies. Companies like Corlido will take over a part of the procurement process so you don’t have to do it yourself anymore. You can bring up the suppliers you want, Corlido will place the orders and will monitor it and will pay all the invoices with the different payment terms. At the end your company will receive one total invoice from one supplier with one payment term. This is time-saving, reduce the supplier base and will unburden different departments in the company.
In addition to that you can choose to outsource the tendering process with Source to Pay. Normally you won’t compare to many different quotes for indirect procurement. So, there is a chance you pay too much. By outsourcing the tendering process, you get the best commercial conditions. At the bottom it could save you up to 21% on internal costs.