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HCMWorks Insights

What Is the Largest Spend Category in Indirect Procurement?

Posted by Julia Fournier on 9 Nov 2015

Though usually considered only a minor concern (especially when compared to direct procurement), indirect procurement is becoming more important in an increasingly competitive market. For some, the term “procurement” alone can cause some confusion, as it covers such a wide variety of goods and services. Because of this, many companies can have trouble tracking down the largest spend category, meaning when they come up with their budgets they can often fall short and that can cause problems.

The Largent Spend Category

To put it simply, the largest spend category in procurement, by far, is people. That might surprise a lot of people – after all, when people hear it, they tend to think of things like janitorial services, maintenance, travel, office supplies, logistics, etc., but rarely of people. While regular employees fall under direct procurement and human resources, contingent workers like freelancers, sole proprietors, consultants and more are actually considered to be indirect. As more and more businesses move towards contingent workers, the costs start to add up, especially in cases where they handle the recruitment themselves without a strategy. It's understandable that not every company has an effective contingent employee recruitment process yet – it's a vastly growing, but relatively new, need.

Streamline Recruitment

Like goods and services, it's important that the recruitment of workers is also held to the same standards of the best rates and the best product (or, in this case, talent) available. Unlike many other goods and services though, employee onboarding builds a lot of its cost simply from the amount of resources and time spent searching, securing and managing them. Businesses that use random hiring managers and poorly thought out systems lose more money than they may think they are, because they're without a serious and effective strategy. When working with contingent workers who are unattached from reputable agencies, you can often end up spending more since there is rarely consideration for bulk discounts, time accountability or even to ensure that you're paying a rate that is considered fair for the industry. Research can certainly help these situations, but it's one of the many good reasons to work with a reputable procurement agency that will handle all those details for you and provide a timely and up to date solution.

Cost Savings

Many companies that make use of contingent workers on a regular basis turn to partners who manage that kind of labor for them: for some companies, because they're unsure where to begin and for others, because they're without a strategy on how to manage the growing need. Something all companies can get behind, however, is the bottom line. Cut costs so that more money can be spent internally.

If you're wondering how partnering with an agency can help cut costs, consider how an expert in indirect procurement can streamline the process. Not only are they equipped with all the latest research and technology, but have vast networks of reliable and skilled contingent workers at the ready. This means you don't have to worry about searching through thousands of freelancer profiles, vetting each and every one, ensuring delivery times, quality of work, and the prices given and paid are fair and reasonable.

Gain Control of Your Contingent Labor Spend

It's all done in advance, including negotiations, worker management and all HR needs, so you can stop worrying about expending resources, unclear markups and standard market prices and instead, focus on getting your most important business goals fulfilled. An agency's entire business is to get you the best services and talent for the best prices and because they're highly specialized, they manage all related peripherals and complexities with ease.

Remember: Anything that saves you time and resources is something that saves you money.

 10 Ways to Reduce Costs & Risk of Your Contingent Workforce

Tags: Procurement

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