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Process costs: definition & important points for buyers
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Litigation costs in a nutshell:
Process costs are all expenses incurred in the execution of business processes, including personnel, system and administrative costs. In purchasing, their systematic recording and analysis enables the identification of optimization potential and the evaluation of the actual profitability of procurement processes.
Example: A standard order with a goods value of 500 euros incurs average process costs of 85 euros, consisting of 45 minutes of working time (38 euros), IT system costs (22 euros) and administrative expenses (25 euros), which demonstrates the need for an order value limit of at least 250 euros.
Contents
Introduction to process cost analysis
What are legal costs?
Process costs are the costs incurred in the execution of business processes within a company. In purchasing, process costs refer to all expenses associated with the procurement of goods and services, with the exception of direct material costs. This includes costs for order processing, supplier management, quality assurance and internal administration. Understanding and optimizing these costs is crucial to increasing efficiency in purchasing and securing competitive advantages.
Core elements of process costs in purchasing
Importance of process costs in purchasing
The analysis and optimization of process costs are of great importance for purchasing departments. By reducing these costs, companies can improve their margins and use resources more efficiently. Effective process cost management leads to:
Calculation of process costs in purchasing
Process costs in purchasing are determined by analyzing the costs of individual process steps such as ordering, goods receipt and invoice verification. This makes it possible to identify cost drivers and implement targeted measures to increase efficiency.
Calculation example
Example: A company wants to determine the process costs per order.
- Costs for order processing: 20 € per order
- Costs for incoming goods inspection: 15 € per delivery
- Costs for invoice verification and payment processing: €10 per invoice
Total processing costs per order:
20 € (order processing) + 15 € (incoming goods inspection) + 10 € (invoice verification) = 45 €
With 200 orders per month, this results in monthly processing costs of:
200 orders x 45 € = 9,000 €
Costs per order could be reduced through optimization, e.g. the introduction of an electronic procurement system:
- New costs for order processing: 10 € per order
- Total cost reduction: 200 orders x (20 € - 10 €) = 2,000 € savings per month
This enables the company to reduce its legal costs from €9,000 to €7,000 per month.
Evaluation and strategic findings
✓ Critical success factors
→ Process standards: Establishment of uniform processes and documentation standards for reliable cost calculation
→ Degree of digitalization: automation of routine processes to significantly reduce costs
→ Employee qualification: staff training in efficient process handling and digital tools
⚠ Challenges
→ Complex cost structures: difficulty in the exact allocation of overheads to individual processes
→ Process variance: Different requirements for different product groups make standardization difficult
→ Change management: overcoming resistance when implementing new processes
Future trends and strategic implications:
"The future lies in the intelligent automation of procurement processes with continuous cost control."
→ Predictive analytics for process optimization
→ AI-supported order automation
→ Real-time process cost monitoring
→ Integration of e-procurement solutions
Conclusion on legal costs
Process costs in purchasing are a decisive factor for a company's profitability. The systematic recording, analysis and optimization of these costs holds considerable savings potential. Process costs can be significantly reduced through the targeted use of digitalization and automation. The key to success lies in the combination of standardized processes, qualified employees and modern IT solutions. Only those who know their process costs and actively manage them will be able to remain competitive in the long term.
