Despite what you may think, outsourcing can be very profitable for a company. A lot of big companies already outsource the P2P and S2P. In this article we will explain what P2P and S2P is and what the benefits of outsourcing P2P and S2P is.
P2P and P2C
P2P (Procure-to-Pay) and S2P (Source-to-Pay) are parts of the procurement process which often are outsourced. The procurement process has different phases. First the company specifies their needs, secondly the company ask for multiple quotes. This called tendering. After receiving the quotes, the company selects the best suppliers and place and order at the best supplier with the best conditions. After the order is placed, the order will be shipped and delivered. Monitoring this process is called tracing. Once the order is delivered, the invoice has to be paid for completing the procurement process.
For goods and services which are important for the core activities of the company, the company keeps the responsibility for this whole process. For goods and services which not directly influence the core activities of the company, it’s often outsourced.
Direct procurement and indirect procurement
The procurement of goods and services which are important for the company core activities, is called direct procurement. For example, for a company like Phillips, who produce medical equipment, micro-chips are important for the production of the medical equipment. These micro-chips are often ordered at suppliers are therefore important for the core activities of the company. That’s why the procurement of a company as Phillips orders those micro-chips themselves.
Indirect procurement is most of the time not that high on the agenda. Indirect procurement is the procurement of goods which are not directly important for the core activities of a company. Office supplies are good examples of indirect procurements. Every company needs them, but it won’t directly harm your production. Therefore, the importance of indirect procurement is often neglected. Most of the time the suppliers of indirect goods are so-called c-suppliers. C-suppliers are suppliers where you only order once and probably not order frequently. These c-suppliers are very time-consuming and therefor expensive. For each single supplier, you’ll receive a different invoice with different payment terms and conditions. Controlling the invoices and paying the suppliers according their terms. The supplier base consists for the most part of those c-suppliers.
Outsourcing the indirect procurement
Indirect procurement is a hidden treasure, there is a lot of savings possible with indirect procurement. By outsourcing the indirect procurement a company can save up to 21% on the internal costs. Instead of invoices from every c-supplier, you will receive one total invoice from one point of contact. This will reduce your supplier base up to 80%. And you don’t have to monitor, control and pay all those different invoices anymore, but just have to control one total invoice.
With outsourcing P2P a company still controls the tendering and selecting process. So, you are sure the order will be placed at a suppliers u want. The ordering, trace, deliver and payment is outsourced.
With outsourcing S2P, you’ll outsource the selecting and tendering too. By outsourcing these phases, you are assured you’ll get the best products for the best prices. Outsourcing can save up to 21% on internal costs.