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Procurement Freelancers
Transforming Indirect Procurement – The Best Way to Add Value to Your Business
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Introdu ction
With the advent of the digital transformation of business, traditional models of procurement and sourcing are gradually falling out of fashion. Companies are now looking for datadriven models that allow them to improve and add more value to their enterprise. For this purpose, most procurement agents are now trying to optimize indirect procurement with the help of digital transformation.
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Adding Value to Your Business through Indirect Procurement
A company’s indirect expenditure can account for approximately 25-40% of its entire procurement. It’s critically important for procurement professionals to find ways to account for every dollar while minimizing risk and lost value due to fraud, human error, eccentric expenditure, and inefficient supply chain management. Value is maximized from direct spending by maximizing the quality and strategic sourcing of direct materials.
In contrast, traditional models of indirect spend management have focused largely on cost reductions through obtaining the lowest possible price, rather than leveraging data analysis, supplier relationship management, and supply chain optimization to identify, and pursue, value-focused opportunities.
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Optimizing Indirect Procurement Strategy for Your Business Procurement teams do not typically focus on reducing their indirect spending. Often, this is due to the complexities of dealing with a broad spectrum of commodities in multiple categories.
There could be hundreds of indirect spend categories and tens of thousands of suppliers to manage. The lack of visibility in indirect spending brings forth a significant challenge.
Therefore, taking a strategic approach to your company’s indirect procurement processes can help you reduce its negative effect on your profits. Optimizing your indirect expenditures can have a significant effect on your bottom line.
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Digital Transformation of Indirect Procurement Management
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Digital transformation of indirect procurement can provide you the necessary competitive edge to ensure sustainability and profit. With the advent of technology, companies can manage their procurement more efficiently through automation, digitization and changing trade force. Digital transformation of procurement is essentially changing the way enterprises use their data, and making it more dynamic and flexible. It would improve the value proposition by leveraging the knowledge of spend, suppliers and categories. Besides, it allows procurement agents to focus on strategic buys and increase sourcing speed. In the near future, the digital transformation of finance and procurement is expected to yield much more visibility for the companies, so they can make better and informed decisions regarding their expenditure. Moreover, digital tools will empower procurement to team up with finance more efficiently to work beyond cost-savings and optimize their purchase-to-pay (P2P) systems for both direct and indirect procurement.
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Conclusion
Digital transformation of procurement can reap substantial operational benefits. It can make the process anti-fragile, leveraging digital means. This is the reason procurement agents are investing in customized software to manage the entire procurement cycle in an efficient, hasslefree way. So, if you want to make the most out of your business, it is high time to invest in digital tools for your indirect procurement.
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