Reducing procurement process costs: How companies save time and money

Prozesskosten im Einkauf: Der versteckte Kostenfaktor in Unternehmen

Procurement Process Costs: The Hidden Cost Factor in Companies

by Anna Ullmann on Jun 10, 2026

Procurement & Purchasing

Why many companies save on item price but overlook the actual costs in the procurement process.

What are process costs in purchasing?

Process costs are all costs incurred during a procurement process. They do not include the actual value of a product but rather the effort for ordering, approval, delivery, and invoice processing.

Many companies focus exclusively on the item price when purchasing. However, internal processes often incur significantly higher costs.

In short

It's not the item price, but internal process costs, that are usually the biggest lever. A 5-euro item can incur 30 euros or more in administrative costs; consolidated suppliers and core assortments are the most effective ways to reduce these costs.

Example: A seemingly inexpensive order

An employee needs a ballpoint pen for 3 euros.

However, the actual procurement process often involves many more steps:

Determine need
Search for product
Select supplier
Place order
Obtain approval
Check goods receipt
Process invoice
Make payment

The administrative effort can quickly cost many times the actual value of the goods.

What process costs arise from an order?

Personnel costs

Employees invest time in:

Product search
Price comparisons
Inquiries
Approvals
Invoice verification

System costs

ERP systems
Purchasing systems
Accounting software
Document management

Communication effort

Every email, call, and inquiry incurs additional costs and ties up working time.

Supplier management

The more suppliers that need to be managed, the higher the organizational effort.

Why are process costs often underestimated?

The item price is directly visible. Process costs, on the other hand, are distributed across various departments and rarely appear consolidated in a single cost center.

Purchasing
Specialized departments
Accounting
Goods receipt
Management

As a result, they often remain hidden, even though they account for a significant portion of the total costs.

Which orders incur particularly high process costs?

This particularly often affects so-called C-items. The value of the goods is low, but the number of orders is high.

Copy paper Ballpoint pens Notepads Toilet paper Paper towels Cleaning supplies Coffee

How can process costs be reduced?

Consolidate suppliers

Fewer invoices, fewer orders, and less master data maintenance.

Define core assortments

Standardized products reduce search efforts and incorrect orders.

Digital procurement

Price lists, approvals, order histories, and fixed assortments accelerate purchasing.

Bundle orders

Bulk orders reduce the number of individual procurement processes.

Why the cheapest item is not always the cheapest solution

Many companies save a few cents on a product while incurring high internal process costs.

A slightly higher item price can be more economical if it results in:

fewer orders needed
simplified processes
employees saving time
fewer invoices

The decisive factor is the total cost of procurement, not solely the price on the offer.

Conclusion

Process costs are among the biggest hidden cost drivers in purchasing. Especially for frequently needed C-items, internal efforts often exceed the actual value of the goods.

Companies that consolidate suppliers, define core assortments, and utilize digital ordering processes can make their procurement significantly more efficient and save costs in the long run.

Frequently Asked Questions

How do I roughly calculate process costs?

Record the time of all involved persons per order step (requirement, approval, order, goods receipt, invoice) and multiply by the respective hourly rate.