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HCMWorks Insights

Why Each and Every Cost Needs to Be Minimized

Posted by HCM Works on 14 Aug 2015

Indirect procurement consists of sourcing all of the products and services that your organization needs in order to function on a daily basis. By far, people will be the largest spend category under the indirect procurement umbrella.

The Shift to Continent Labor Presents New Challenges

Procuring your contingent workforce in particular can be a lot more costly than you would expect. The current on-demand economy and the shift to using contingent labor present new procurement challenges for organizations. Non-permanent workers are now making up more and more of companies’ total workforces but they’re not typically hired through HR departments but on a departmental or project level. They are also paid differently and fall under separate tax rates and rules.

Because the widespread use of contingent labor is relatively new, effectively managing this indirect spend can be costly as it isn’t fully understood by most business owners just yet. When procurement departments are so focused on obtaining required talent at an optimum rate for the project at hand, they can forget to factor in invisible costs, such as risk management, compliance, business value, and other important considerations that could end up being expensive in the end.

Though indirect procurement is increasingly being recognized as a unique business discipline in corporate America, many business owners still do not fully understand the value of efficient and cost-effective labor procurement.

Keep Track of Every Dollar

Though having the right people in place and the ability to quickly on-board them is critical to your company’s goals, you should always be trying to minimize costs. That’s why it’s especially important to keep track of and scrutinize every dollar during procurement. After all, you cannot control what you can’t see. Invisible costs could be hurting your bottom line.

The better you can track and control your spend on indirect procurement the more effectively you can minimize costs. When you minimize costs associated with indirect procurement, you can save up to 15 percent, on average. Considering your company likely spends millions on contingent workforce procurement, the money you would save just by reducing your spend by a small percentage can be significant.

Use Technology

Using technology to procure your workforce can be a highly effective way to minimize costs. With the right e-procurement software, you’ll be able to configure exact requirements to get the best talent, set spend authorizations and freezes for better control, apply different hiring rules and restrictions for projects or organizations, track and manage all of your contractors, and gain visibility into your workforce and spending trends.

The more you know about your indirect procurement spend, the better you can control it for reduced costs. Technology can help streamline and automate the process for increased efficiency.

Total Workforce Management Solution

Technology should be used as part of a total workforce management solution that moves beyond cost control and project management. Such a solution can significantly minimize costs. A great total workforce management solution should include the following:

  • a roadmap of your organization’s ambitions and current areas of concern
  • proper transformation management with a designated person responsible for driving change in the procurement process
  • a shift to considering the overall value of the worker to the business rather than just pure cost play
  • a culture of cross-departmental sharing of roles and responsibilities
  • the collection and analysis of talent acquisition and management data
  • the right tools for visualizing and sharing insights about the strengths and weaknesses of your procurement process
  • a unified hub of information for greater cohesion, workforce visibility, and spend control

Procurement Outsourcing

By transferring your indirect procurement processes, resources, and infrastructure to a third-party professional agency, you can minimize costs by allowing experts to analyze your current methods, identify and fix problems, and create new processes that are more effective. Outsourcing this critical task will save you money.

Exploring Your Contingent Workforce Ecosystem

Tags: Procurement

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