Little “mom-and-pop-shops” mostly don’t have problems with a huge supplier base. Big multinationals companies do. They often have hundreds or thousands different suppliers which can be a struggle for the procurement and invoicing department. Because of that, these companies try to reduce their supplier base.
How a company gets a huge supplier base
Multinational companies often have hundreds or even thousands of employees. To be able to work, these employees need desks, computers and other office supplies. The procurement of these office supplies is not on a regular base, most of the time only once or twice. The procurement of these goods is also known as indirect procurement. Because these goods and services won’t directly harm the company’s core business. A multinational company can still continue with their core business if there is a shortage of coffee cups, the lack of these coffee cups won’t directly harm the core business of the company.
This is how a huge supplier base can cause problems
A company doesn’t order on regular base at suppliers of office supplies like coffee cups. Most of the time it is only once ore twice. For the company it’s time consuming to search for the right suppliers. Most of the times they don’t even start a tender because it takes too much time. When the order is placed by the procurement department the company have to create a new creditor. The delivery and invoice have to be checked and paid in time. Because every supplier has his own payment terms, it can be hard to keep up every single invoice and terms and mistakes are easily made by the financial department.
This is the solution: Outsourcing
For the company who struggle a lot with these one-time suppliers and their invoices there is an easy solution: outsourcing. Instead of tendering, selecting, ordering and paying these one-time suppliers. Outsourcing it to a specialized company is the solution. As company you can outsource different parts of the procurement process.
Outsourcing the company’s invoice management
All these one-time suppliers with their own invoice cause a huge supplier base. Therefore, a lot of multinational companies choose to outsource the invoice management. Instead of all the different, single invoices and terms, they only receive one total monthly invoice. This can reduce the company’s supplier base up to 80% and saves the company a lot of time and money and will unburden the different departments within the company.
Outsourcing the company’s indirect procurement
Instead of only outscouring the invoice management companies often choose to outsource the indirect procurement. With procure to pay, the company choose the suppliers and outsource the ordering and payment process. With source to pay, they even outsource the tendering and selection process. These specialized companies will start a tendering process and will select the best suppliers with the best prices and terms. Besides the reduction of the supplier base up to 80%, it can save the company up to 21% on the internal costs because of the best prices.
Infographic Created By Corcentric, Supporting Your Business Goals With Managed Accounts Receivable