How Procurement Improves Profits

How Procurement Improves Profits – There are many aspects to a company which creates massive scope for a procurement function to increase the business’s profitability. Creating opportunities for new revenue and cutting costs are two main ways this is possible. Below we discuss these and other ways procurement can make your company more profitable.

Procurement understands the corporate strategy and supports it

Procurement looks at the company’s objectives and at how it can support them. You’re likely keen to cut costs, and a look at spending across the supply chain is one obvious way to do it, which can lead to significant savings.

It’s essential for there to be clear communication between the top level management of the company and everyone involved in procurement. Excluding procurement from the plans and not updating them on the strategy will undoubtedly result in failure.

Procurement streamlines processes

Automation can speed up workflows because the right tools simplify processes and increase productivity. Using digital technology, procurement teams can spend less time on repetitive tasks or multi touch point ones. The automated workflows can take the place of admin-heavy processes, and when action is necessary, users will receive a notification.

Procurement consolidates purchase orders

To keep down PO processing costs, it’s important to submit POs as efficiently as possible. Procurement software can centralise and consolidate purchase orders from different departments, multiple users or branches. This reduces processing costs, paves the way for better deals and discounts, and ultimately, helps you to become more profitable.

Procurement controls operational costs

Keeping costs low is the aim in procurement, but an awful lot can go wrong. People can order the wrong products or services. Orders can become duplicated. There may be issues with distribution. All of this induces either a financial cost, a time cost or both.

Procurement can minimise a lot of these errors to help the business stay profitable.  It can also help you to maintain a balance between too much stock and too little, which reduces unnecessary spending.

Procurement maintains quality

Good supplier relationships are crucial in procurement. They enable you to get the best goods and services at the best value for your money. A good relationship with your supplier can also increase long-term savings by avoiding issues with quality, supply and availability.

As you build better relationships, you may decide to use fewer suppliers and consolidate your supply chain. This can increase efficiency and generate major savings. Good relationships with suppliers will also create scope for ongoing improvement of your operations because you’ll be able to pass feedback between each other and innovate.

Procurement changes spending behaviour

When you use the right tools, procurement builds a responsible spending culture and changes spending behaviours. The tool encourages more cost-conscious accountability and better spending decisions.

This is a proactive approach to spend management and can increase profits. The existence of the internet and of mobile apps eliminates excuses for not submitting purchase requests or expense ones. The company should also establish a rule that no spending or reimbursement is possible without an approved request in the system first.

Procurement can increase your bottom line in lots of different ways. We offer a variety of services, including a cost transformation service that entails four key activities —spending and opportunity assessment, cost reduction, category management and transaction management— to help you boost your profitability. To find out more about this service or any of the services we offer, visit the Services section of our site or get in touch via the details on our Contacts page and we’ll get back to you.