Why sourcing activities lead to profit leverage

Leverage on procurement profits.

The reason why procurement has an important position in enterprise management is that there is a "profit leverage effect" in procurement. It is the existence of this effect that makes the senior managers of the enterprise try their best to work the procurement and "squeeze" more profits for the enterprise, and it is precisely because of this that the procurement department is more and more valued by the senior managers of the enterprise in this era of low profits. For example, suppose that 50% of an enterprise's funds are used to purchase raw materials, and its pre-tax profit is 10%, then for every 100,000 yuan of its income, it will get a profit of 10,000 yuan, and 50,000 yuan of the 100,000 yuan of income will be used for procurement, we assume that the purchasing department has worked hard to reduce the procurement cost by 2%, then 1,000 yuan will be added to the profit, and if it is replaced by increasing sales to obtain the 1,000 yuan profit, then it will be necessary to increase 10% of the sales to achieve, that is, sell more than 10,000 yuan.

However, do not simply compare 2% with 10%, because it may not seem difficult to reduce the procurement cost by 2%, but in actual operation, you may have to work hard for this 2%, and sometimes you may not reach the target despite the effort.

Procurement activities can reduce the cost of the enterprise (inventory cost, production cost), which can lead to profit leverage.

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Summary. Hello dear! We're happy to answer for you!

The leverage effect of procurement is mainly reflected in low cost and high profit: the leverage effect of procurement is a direct means to measure the performance of procurement work. Good procurement can create profits for enterprises and obtain potential market resources.

The quality of the product (the condition is that there is no problem with the product positioning) has the best advantages, and its market prospects are very broad. Procurement is the source of profit that many enterprises pay attention to. <>

Hello dear! We're happy to answer for you! The leverage effect of procurement is mainly reflected in the low cost and high profit of Dongna:

Procurement leverage is a straightforward way to measure the performance of procurement work. Good procurement can create profits for enterprises and obtain potential market resources. The quality of the product (the product is not the problem of product positioning), has the best advantages, and its market prospects are very broad.

Procurement is the source of profit that many enterprises pay attention to. <>

Affinity, leverage effect, was later widely used in the field of finance. In the financial field, the leverage effect refers to the fact that investors use a relatively small amount of capital to amplify the risk and return of the transaction through the margin system. In the field of financial leverage, financial leverage refers to the appropriate borrowing of enterprises in financing to bring additional income to the enterprise by adjusting the capital structure.

The phenomenon of leverage appears in all aspects of life, work, and laughter. For example, certification can also be understood as the use of leverage to obtain a significant long-term increase in income after obtaining a certificate through a small amount of research fees. For another example, the college entrance examination can be understood as a fulcrum, and continuous and effective efforts are a long lever that allows us to pry the class across and achieve a counterattack.

Maximize cost savings.

1.Save on procurement costs. Enterprises carry out centralized procurement, and can gather similar materials and equipment in various branches or departments for unified bidding (price comparison), so that because of the large demand, the first business will generally float.

Compared with the independent procurement of each branch or department, it will save a lot of costs!

At the same time, you can also gain advantages in payment, for example, the payment cycle of each branch or department may be 3 months, then after signing the centralized procurement, the payment cycle may be half a year, or even one year, which reduces the capital occupation rate of the purchaser, which also improves the company's efficiency in disguise and alleviates the company's payment pressure.

2.Improve the quality of service. Centralized procurement will generally sign a "strategic cooperation centralized procurement agreement" or "procurement sales contract", because the consumption is large and the demand is relatively stable, the first business will generally give priority to the supply to the centralized procurement demander (Party A), and will give priority to the organization of materials and equipment training exchanges, after-sales service and other matters.

In general, centralized procurement will enable the purchaser to obtain higher service quality, because you are a "big customer" and "big rich man" in the eyes of the best businessmen.