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Procurement could boost profits

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Posted on 30/05/2013 by Wayne Brophy FCILT

Strategic procurement is more than just a way for businesses to save money. Over the years, it’s actually become a profitable part of business. Businesses with a top performing procurement team have been found to rake in up to 22 per cent greater profits than those with an inefficient one.

Changes to operating model and business-to-business cooperation may be responsible for the increased success. In addition, the overall attitude and role of procurement is changing. Businesses have much to gain from the transforming ideology – one that embraces technology and interconnectedness – as procurement has a significant potential for revenue.

Purchased goods and services usually account for over half of a company’s sales value, so capitalising on procurement’s potential can reap big dividends.

According to the 2013 Chief Procurement Officer (CPO) Study conducted by the IBM Institute of Business Value (IBV), there are a number of ways through which CPOs can maximise profits. Top procurement organisations use data analytics to identify weak points in the supply chain and gain insight on company and network operations. Over 80 per cent of successful CPOs use analytics to their advantage.

In addition, 94 per cent of top performing businesses use procurement technologies to manage operations. Just over 80 per cent use social business technology for crowd sourcing and internal collaboration. Embracing technology has proven to be an effective strategy.

General manager of IBM Industry Solutions, Craig Hayman, said: “As CPOs take a broader view of their role and embrace technology, they have an unprecedented opportunity to become even more instrumental in transforming their organisations by modeling themselves against the world's most innovative and effective procurement organisations.”

Furthermore, IBM has announced that high-performing procurement teams are boosting profit margins results by as much as 7.1 per cent. As a result, companies with a successful procurement department at their side are reporting profit margins up to 15 per cent higher than the average company.

As IBM’s survey has shown, a procurement team’s ability to change with the times and adapt to technological innovations could have a significant impact on a business’ competitive advantage, efficiency and profitability.

Looking for procurement jobs? At Cast UK our team of expert consultants can help you find your ideal role. 

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