#This is Procurement- Can we increase margin using procurement team? Really!?
Sometimes I get the feeling that if, together with maths and mother tongue, savings management were taught in primary school, it would never be needed to explain adults what is Procurement meant for! Ok, good for marketing, HR, logistics, etc :-)
Good news are decision makers DO understand why should Procurement be seated in the board instead of reporting to other departments. Just need a push and strong arguments!
Let´s look at this example (not real):
Company A sells instant juice - 300.000€ Y/sales// Production cost per unit: 1€ // Sales Price per unit: 2,40€ // Margin per unit: 1,40€ (not going in detail about type of margin) // Total margin for 125.000 units: 175.000€ // Target for 2019 = increase margin. What would you do?
1st scenario: go for all sales techniques you know and:
- "Do your research so you know what a good deal looks like;
- Have the courage to propose the discount you want;
- Use incremental volume to generate greater discounts;
- Use the ‘nice to haves’ to add value towards the close;
- Look for just superseded models rather than the newest "hot" product; and
- Be efficient, don't waste the salesperson's time - they'll reward you with more flexibility if they can close the deal quickly and move on to the next customer." (in https://www.scotwork.co.uk/):
2nd scenario: ask your Procurement team to go for a negotiation of your production cost. Increase margin. Increase savings. End of story.
This is Procurement.