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Doug Austin is the Founder and CEO of StrategicSource. He is a thought leader in spend management and the industry. Doug is also a Marine Corps Veteran.
Purchasing Departments or Spend Management functions are a given in most larger organizations.
They are typically charged with:
Today's economy is confusing and difficult to manage. Sales might be going up, but many dealers are seeing unnecessary costs rising, which lowers their profits.
In this article, we'll cover common sources of revenue leakage and strategies to plug the holes.
Many organizations’ profits are being challenged by compressed margins, growing expenses, flat sales and greater competition. As leaders, it is up to us to have plans in place to prevent that profit erosion and have the data, tools, reports, metrics and strategies to manage through to better results and targeted profitability.
A high-performing purchasing or sourcing group can make contributions to the business in a number of ways. Most people think of purchasing groups in terms of their ability to reduce costs and improve overall profitability and that is the probably the greatest focus of most groups. Additionally, purchasing’s role in the supply chain is to also ensure that the “right goods are procured, at the right cost, at the right time, at the right quality levels and in the right quantity and delivered to the right location”.
Purchasing teams can also have an impact on the administrative impact of a business by ensuring that a narrow, high performing supplier base is in place vs. a large, bloated, inefficient supply base that reduces leverage and adds costs. High performing Purchasing groups can also impact your gross profits in a positive way…..in many more category areas than you might have first thought.
The categories that make up goods and services that are ultimately resold to your customers are many and offer some real significant opportunities to buy for less, increase your mark-ups and sell for more - improving your gross.
Business leaders face many challenges and many opportunities every day. If leading your organization to reduced costs and improved profitability is a course you have chosen, developing an aggressive objective and an executable plan are essential next steps.
There is no question that dealerships are focused on cutting costs. We see it in our business, we heard it at NADA and we talked with suppliers at NADA who were honing in on that message as well. Cut costs and track the reductions…a great objective for any business or non-profit.
Most business organizations find themselves involved in cost reduction initiatives from time to time. To sustain an organization over the long term, cost reduction efforts need to become deeply ingrained in the business structure itself and that is usually accomplished through a Spend Management or Purchasing Department. Purchasing is typically charged with sourcing, quoting, negotiation, implementation and supply base management responsibilities including compliance audits.
Is improved profitability really a priority for most organizations?
Most organizations in the U.S. and Canada are decentralized in their purchasing approach. What that means is various leaders, managers or employees within departments are charged with managing selected expenses, including the periodic shopping, quoting, benchmarking and negotiation with suppliers.
My business has been supporting all types of businesses and non- profits for over 25 years with spend management strategies. This isn’t to brag, but it is to say that we have worked with many businesses and learned something from them.
