The Procurement P&L Wheel illustrates how procurement impacts both profits and losses within a company. On the profit side, strategies such as strategic sourcing, supplier collaboration, and contract compliance help maximize value and strengthen the bottom line. On the loss side, inefficiencies, maverick spending, supplier risks, and poor data visibility can eat at savings and enhance costs. This wheel mentioning the need for procurement leaders to balance cost drivers with value making to ensure sustainable business growth.
A) Revenue & Profit Drivers
1) Strategic Sourcing: Optimize supplier base for better pricing and quality.
2) Supplier Collaboration: Co-innovate with vendors to unlock growth.
3) Volume Consolidation: Gain economies of scale through bulk deals.
4) Contract Compliance: Ensure negotiated savings actually hit the bottom line.
5) Sustainable Procurement: Reduce long-term costs with ESG-friendly sourcing.
B) Cost & Loss Drivers
1) Inefficient Processes: Manual workflows increase errors and delays.
2) Maverick Spending: Uncontrolled purchases erode negotiated savings.
3) Supplier Risk: Disruptions, bankruptcies, or non-compliance inflate costs.
4) Logistics & Freight Costs: Fluctuating fuel and shipping add hidden losses.
5) Poor Data Visibility: Lack of insights leads to missed opportunities and waste.
Author’s Bio:
Pankaj Tuteja
Head of Operations – India
https://www.dragonsourcing.com