Procurement makes money for business

24 May 2013

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27 May 2013 | Kathryn Manning

Strategic buying teams are no longer just saving money for their businesses but also making profit.

While it is within procurement’s capability to aid revenue-generation, whether they get that opportunity depends on factors such as the nature of the business, economic climate, vision of senior leadership and corporate culture.

As reported in Supply Business, UK procurement team at concert, music festival and ticketing business Live Nation as helped to overhaul the way it conducts parts of the company to grow income. Re-thinking the operating model was the result of procurement and commercial working together, according to Brian Grew, vice president, commercial.

Using the supply chain as a sales channel was a strategy used by procurement at online media company IAC/Interactive Corp while it was the parent company to Expedia and its corporate travel arm. For example, in every new negotiation for IAC corporate, an introduction to the suppliers’ corporate travel head was requested, although being mindful of reciprocity issues. It was a successful arrangement that enhanced procurement’s reputation. They were no longer seen as mere price enforcers.

At Procter & Gamble’s (P&G) Cover Girl cosmetics, buyers who regard innovation as an essential part of their role have drawn on product ideas from suppliers that meet consumer needs. One example was mascara. A provider had a brush design that procurement identified when paired with Cover Girl’s mascara formula would deliver a superior performance. It negotiated a multi-year supply agreement that granted P&G exclusivity on the brush and the result has taken the Cover Girl product from number four to contending for market leadership.

Meanwhile, at the Football Association (FA), procurement is helping to increase income by bringing in investment from suppliers. Procurement manager Ian Fenwick, who joined in December 2011, believes that by the end of this year it’s realistic to think that 10 per cent of box sales could have come off the back of procurement and new contracts.

Guy Strafford, chief client officer at Proxima, says particular industries such as retail or hotels, will commonly use procurement to generate revenue. “They might have responsibility for a product or other opportunities to generate revenue. In the hotel industry, for example, procurement might provide services for franchises. It may also support the sales arm of a business.”

 ☛ The full feature, The growth generation, is in the March edition of Supply Business

Supply Business is an international supply review published quarterly aimed at CPOs and senior stakeholders including CFOs, COOs and CEOs with an interest in procurement and supply operations. The magazine and online access is available on subscription. To subscribe click here or call +44 (0)20 7324 2746.

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