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This is how you can reduce your supplier base

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Big multinational companies are familiar with the huge supplier base. Every supplier used their own terms and conditions. For multinational companies it can be very difficult and time consuming to avoid mistakes and live up to all these different terms and conditions. Because of that, there are multiple ways to reduce the supplier base and create a better invoice management.

This is how a company gets a huge supplier base

Multinational companies are active in multiple countries and often have hundreds or even thousands of employees. For these employees the company provides goods and services to make them able to work. For example, office workers need a chair and a desk to do their work. These goods are not infecting the company’s core business directly. So, these goods are called indirect goods. Other examples of indirect goods are coffee and tea cups. The company have to buy it once in a while to make it possible for the office workers to have a drink, but without these goods a company can still continue with their core business. The procurement of these goods is also known as indirect procurement.

This is why a huge supplier base can cause problems

Indirect procurement can be a struggle for a company. Because most of the time a company order one or two times the needed goods at the same supplier. It’s not a monthly returning order. 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 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.

Outsource the invoice management

Because all of those single invoices from one-time suppliers, 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 saves the company a lot of time and money and will unburden the different departments within the company.

Outsource the indirect procurement

Instead of only outscouring the invoice management companies often choose to outsource the whole indirect procurement. They don’t start the search for suppliers of indirect goods themselves, but leave it to other specialized companies. These companies will start a tendering process and will find 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. 

Source to pay and procure to pay

The procurement process can be outsourced in different parts. Besides invoice management a company can choose for procure to pay. The company will be responsible or the tendering and selecting of the right suppliers. The ordering, monitoring and payment will be outsourced. With source to pay the company outsource the tendering and selecting process too.