Procurement Glossary
Process costs: definition, calculation and control in Procurement
November 19, 2025
Process costs refer to the total of all costs incurred through the execution of business processes. In Procurement , they include all expenses for procurement activities - from the determination of requirements to invoice processing. Precisely recording and controlling these costs is crucial for optimizing procurement efficiency. Find out below what process costs are, how they are calculated and what methods exist for reducing costs.
Key Facts
- Process costs arise from all activities of a procurement process
- They include personnel, material and overhead costs of the purchasing organization
- Typical cost drivers are order frequency, number of suppliers and complexity
- Activity-based costing enables costs to be allocated according to cause
- Digitization can reduce process costs by 20-40
Contents
Definition: Litigation costs
Process costs are all costs that are incurred during the execution of business processes and can be allocated to the respective activities according to causation.
Basic components of process costs
Litigation costs are made up of various types of costs:
- Personnel costs for all employees involved
- Material costs such as IT systems, office supplies and communication
- Overheads for infrastructure and administration
- Opportunity costs due to capital commitment
Process costs vs. traditional cost accounting
In contrast to traditional cost center accounting, activity-based cost ing allocates costs to specific activities. This enables a more precise calculation and better decision-making bases for optimization measures.
Importance of process costs in Procurement
Process costs are a critical success factor for purchasing organizations. They have a significant impact on the total cost of ownership and can account for up to 15% of the purchasing volume if processes are inefficient.
Methods and procedures
The systematic recording and optimization of process costs requires structured methods and proven procedures.
Activity-Based Costing (ABC)
Activity-based costing assigns costs directly to the activities that cause them. Cost drivers are identified and cost rates are determined for each activity. This method offers a high level of transparency regarding the actual process costs of individual procurement processes.
Process analysis and value stream mapping
Inefficiencies and cost drivers can be identified through detailed process analyses. Value analysis helps to differentiate between value-adding and non-value-adding activities and uncover optimization potential.
Benchmarking and comparison of key figures
The comparison with internal and external benchmarks enables the company's own process efficiency to be evaluated. Important key figures include costs per order, throughput times and the degree of automation of procurement processes.
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Key figures for controlling process costs
Effective key figures enable the continuous monitoring and optimization of process costs in Procurement.
Key cost figures per transaction
The order costs per transaction are a key performance indicator. They include all expenses from the purchase requisition to invoice processing. Typical values are between 50-200 euros per order, depending on complexity and degree of automation.
Process efficiency indicators
Throughput times, degree of automation and error rates measure operational efficiency. A high degree of automation usually correlates with lower process costs and higher process quality.
ROI key figures for optimization measures
The ROI in Procurement evaluates the profitability of process improvements. Investments in digitalization typically pay for themselves within 12-24 months through reduced process costs.
Risks, dependencies and countermeasures
When managing process costs, there are various risks that can be minimized by taking appropriate measures.
Incomplete cost recording
Hidden or unrecorded costs lead to wrong decisions. Indirect costs in particular, such as coordination costs or quality checks, are often overlooked. A complete cost driver analysis creates transparency.
Over-optimization of individual process steps
The isolated optimization of individual activities can lead to sub-optimization. It is important to take a holistic view of the entire process chain, taking into account interfaces and dependencies between the process steps.
Neglect of quality aspects
Focusing purely on costs can lead to a loss of quality. A balanced relationship between cost efficiency and process quality is crucial for sustainable success in Procurement.
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Practical example
A medium-sized company analyzed its procurement process costs and found that 60% of orders had a value of less than 500 euros, but accounted for 40% of total process costs. By introducing an electronic catalog for standard items and automated approval workflows, the process costs for these small orders were reduced by 70%.
- Implementation of a self-service portal for standard articles
- Automated budget check and approval up to 500 euros
- Digital invoice processing with automatic reconciliation
Trends & developments around process costs
Digitalization and new technologies are fundamentally changing the structure and level of process costs in Procurement .
Automation and AI integration
Artificial intelligence and robotic process automation (RPA) significantly reduce manual activities. Automated ordering processes, intelligent supplier evaluation and AI-supported price analyses reduce process costs by an average of 30-50%.
Cloud-based procurement platforms
Software-as-a-Service solutions shift IT costs from investment costs to operating costs. This leads to predictable, variable cost structures and reduces overall process costs through economies of scale and automated updates.
Data-driven cost optimization
Advanced analytics and real-time monitoring enable continuous process cost optimization. Predictive analytics helps to identify cost drivers at an early stage and initiate preventative measures.
Conclusion
Process costs are a decisive success factor for efficient procurement organizations. Systematically recording and optimizing them enables significant cost savings and improved service quality. Digitalization offers the greatest leverage for sustainable process cost reduction. Companies that manage their process costs transparently create sustainable competitive advantages.
FAQ
What are the main cost drivers for legal costs?
The most important cost drivers are personnel costs for manual activities, IT system costs, communication costs with suppliers and internal coordination processes. Individual inquiries and special procurements are particularly complex.
What is the most effective way to reduce process costs?
The greatest savings potential lies in the automation of recurring activities, standardization of processes, reduction of the supplier base and implementation of self-service solutions for standard requirements.
What role does digitalization play in process costs?
Digitization is the most important lever for reducing process costs. E-procurement systems, automated workflows and AI-supported analyses can reduce process costs by 30-50% and improve process quality at the same time.
How do you calculate legal costs correctly?
Process costs are calculated by multiplying the cost rates per activity by the number of activities carried out. All direct and indirect costs as well as opportunity costs must be taken into account.
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