Reducing Procurement Process Costs: Why Product Price Isn't Everything

Short answer: For office supplies and other C-items, the time spent on searching, coordinating, approving, ordering, goods receipt, and invoice verification is often more expensive than small price differences in the product itself. Process costs are reduced through core assortments, consolidated suppliers, order lists, and digital approvals.

Where Process Costs Arise

Example Calculation

The Biggest Levers

• Core Assortments: fewer product searches and variations.
• Order Lists: directly find recurring items.
• Supplier Consolidation: fewer accounts, invoices, and packages.
• Approval Rules: quick for standard items, controlled for special needs.
• Minimum Stock Levels: fewer emergency purchases and express orders.

E-Procurement · Procuring C-Items

Analysis Checklist

1. Count orders per month.
2. Estimate average processing time.
3. Record approval and invoicing effort.
4. Check number of suppliers and invoices.
5. Document emergency purchases and incorrect orders.
6. Prioritize the biggest levers.

FAQ

What are process costs in procurement?

Internal costs for searching, coordinating, ordering, delivery, and invoice processing.

Why are C-items particularly affected?

The value of the goods is small, but the administrative steps remain almost the same.

Is price comparison still worthwhile?

Yes, but not for every small item and not without considering the total effort.

How are process costs measured?

Through time spent per step multiplied by internal hourly rates.

What is the quickest lever?

A core assortment with fixed order lists and clear responsibilities.

Sources

BME · Federal Ministry for Economic Affairs and Climate Action as a general guide to digitalization and efficiency.