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What are the differences between direct and indirect procurement costs and how do we reduce them?

The purchasing department is extremely important for organizations. This is mainly because the purchasing department is significant within any organization in two completely different ways. On the one hand, purchasing costs will generally be the largest cost item. The fact that purchasing costs are the largest cost item immediately means that this is also the item where you can save the most. On the other hand, purchasing is extremely important because your company always needs stock. After all, without stock, it is impossible to produce or sell products or services to your customer! Because the purchasing department is so important, in this blog we will take you through everything you need to know about the purchasing department of a company.

Indirect and direct costs

The costs involved in your purchasing can be divided into indirect procurement costs and direct procurement costs. The indirect procurement costs are costs that your organization incurs with regard to purchasing that are not directly needed to carry out your business processes. Think of the costs for office chairs, but also the purchase costs of marketing activities and costs for, for example, a business mobile phone. The direct costs are the costs that can be directly attributed to the main activity of your organization. These are, for example, the purchase costs of the products you sell. The purchase price, the service and shipping costs are in this case the costs that fall under the direct costs.

Reduce purchasing costs

There are several ways to reduce purchasing costs. The most obvious is to buy in bulk. You generally get more discount if you buy more. There is of course a ceiling, but we can certainly recommend that you look for this ceiling. If you don’t need a lot yourself, but do want to make use of maximum volume discounts, you can work with a party like https://corlidogroup.com/. This party is known for its favorable purchase prices and in turn buys the products en masse. Because Corlido Group purchases the products so massively and for so many parties, it is often cheaper to have your products purchased by this party than to look for higher volume discounts yourself. 

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