Does your company have a high or low TCO? Try to get a low TCO as possible is a goal for every company, because it means more net profit. In this article we explain three ways of how you can reduce the Total Cost of Ownership of your company.
What means TCO?
TCO stands for Total Cost of Ownership and is a well-known phrase in business. TCO is the total of costs for the purchase and usage of a product or service during the user cycle. For example, a new machine for the production of your goods. With TCO you calculate the deprecation of this machine, the costs for personnel controlling the machine, insurances, costs for keeping the machine working and a lot more expenses influence on the TCO.
Lower the company’s TCO
Why should a company try to reduce the TCO? For a company it is important to get the Total Cost of Ownership as low as possible. When a company get the same turn-over with less costs, the net profit will be higher. That’s why every company tries to cut costs as much as possible.
The three ways to reduce the company’s TCO
There are a lot of ways to reduce the company’s Total Cost of Ownership, in this article we will highlight three of these ways. Indirect procurement is the procurement of goods and services which are not necessary for the company’s core business like office supplies.
The first way is outsourcing invoice management. The procurement often does business with too many different suppliers. New creditors for one-time purchases are created daily. These C-suppliers make up to 80% of the supplier base. Maintaining the supplier base is time-consuming and expensive. Especially because you probably will never place orders again by these suppliers. By outsourcing the invoice management, you only receive one total invoice, with one payment term and one point of contact.
The second way is by outsource the procure-to-pay. Procure-to-pay is placing the purchase order at the supplier chosen by you, monitoring the order until delivery and controlling and paying the invoice in such an efficient way. Outsourcing the procure-to-pay will make the process even more efficient.
The third way to reduce the company’s TCO is by outsource the source-to-pay process. In addition to procure-to-pay, with source-to-pay you outsource the tendering process as well. Corlido is an independent supplier without a standard assortment. Thanks to the qualified preferred suppliers, Corlido guarantees the best quality, service, prices and delivery time. Outsource the tendering process have a lot of benefits.
The benefits of outsourcing
Outsourcing brings a lot of benefits for the company:
- Single-creditor model: One total invoice, one point of contact, one payment term
- Reduction of the supplier base up to 80%
- Reduction of the invoice differences
- Unburden the financial, logistics and purchasing department
- Lower the TCO and save up to 21%
- Get a grip on your source-to-pay process
First of all, outsourcing can save up to more than 20% on Total Costs on Ownership. This means more net profit. Another benefit is the reduction of the so-called C-suppliers base up to 80%. This will unburden the different departments within the company and at last the company will get more grip on the source-to-pay process.