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Procurement is all about cost reduction right?

Procurement is all about cost reduction right?

For a very long time, procurement has been challenged with keeping costs down, finding a quality product or service at the best possible price. The impact to the bottom line was the critical measurement. And it still is, but there is more we can do!

Just when you think you know what to do, the game changes. This week’s blog pick is Time to Adjust the Strategic Sourcing Agenda by Directworks' Michael Cross. It acknowledges that the main focus for C-level executives is increasing sales. That usually has a lot to do with product assortment, marketing, pricing and availability.

How can procurement impact that?

The first area discussed is speeding up time-to-market for new product introductions (NPI). That involves many factors, but procurement can affect the lead time, freight costs, and the efficiency of logistical components.

The second area is to collaborate with suppliers to bring the next new idea to fruition.

The last area discusses procurement's role in creating flexible pricing options. If procurement can impact the financials in a way that allows a more competitive price point, the consumer will be more likely to purchase the product from their organization.

What has your team done to impact the top line? Have you addressed some of these areas?

Share your thoughts by commenting below or tweeting us @BuyersMeetPoint.

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Comments 2

Guest - Omar Khan (website) on Sunday, 05 October 2014 00:54

Procurement professionals can participate on the design teams and based on their market knowledge and with the involvement of their suppliers can contribute practical cost reduction ideas before even a part is designed. It is too late to try to reduce the cost after the parts have been manufactured, integrated into the product and first revenue shipment has taken place. Think proactive cost reduction upstream in the process. It has been done successfully with great results.

Procurement professionals can participate on the design teams and based on their market knowledge and with the involvement of their suppliers can contribute practical cost reduction ideas before even a part is designed. It is too late to try to reduce the cost after the parts have been manufactured, integrated into the product and first revenue shipment has taken place. Think proactive cost reduction upstream in the process. It has been done successfully with great results.
Guest - Cindy Allen-Murphy (website) on Tuesday, 07 October 2014 12:58

Great comment Omar. I agree with you. Procurement needs to be involved before the part is already produced in order to impact the cost. The proactive approach is quite beneficial for all involved.

Great comment Omar. I agree with you. Procurement needs to be involved before the part is already produced in order to impact the cost. The proactive approach is quite beneficial for all involved.
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Friday, 25 September 2020

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