8 ways to create procurement value

3. New streams of revenue

Your supplier base is a bonus pool of potential customers. Most likely, they consume something similar to what your company produces, and, perhaps, are served by your competitors. Of course, attaching suppliers to your products will not be easy, especially if your competitors are also their customers. However, to get at least a portion of your suppliers' budget is quite realistic. Supplier commitment to purchasing your company's product should become a standard element in your negotiation strategy. In general, the mentality of buyers should be constantly tuned to not only cutting costs, but also to generating new streams of revenue.

Ways in which costs can be transformed into revenue are specific to a company, market, industry, etc. A few practical examples from the aviation industry includes:

• Outsourcing the in-flight magazine to substitute production costs with sharing advertising revenue.
• Re-negotiating an agreement with a travel agency to achieve revenue share from visas issued online to passengers. Previously, all revenue remained with the travel agency.
• A variety of trade-in programmes with computer and mobile terminal manufacturers.
• Selling re-usable or recyclable packaging; returning accessories and certain consumables in exchange for a credit note.
• A yard sale of retired onboard products (dishes, cutlery, linen, blankets, etc.) to suppliers and staff.
• An open auction on corporate vehicles that have reached their maximum mileage.

4. Off-loading the balance sheet

Obsolete and faulty equipment, marketing materials that have not been allocated, stands from past exhibitions, materials with old branding - all of these are 'dead weight' and worth millions on the balance sheet of a company. Identifying these, sorting them based on usability, determining their book value, and then preparing them for sale or disposal is an incredibly complicated process that few people want to deal with.

Procurement and supply chain management would typically elect to off-load a company's balance sheet, optimise warehouse space and associated costs, and obtain additional revenue via the sale of potentially useful assets. The financial benefit of this process thus sometimes exceeds traditional procurement savings.

5. Bartering

You can barter any product or service produced or consumed by your company to eliminate sales, distribution or marketing overheads, and, most importantly, to save cash. You can grow your client base, sell-off dead stock or reduce bad debt. You can also employ specialist companies offering airline tickets, hotel rooms, advertising assets, etc. in exchange for barter currency. Bartering tools can thus be used to attract new revenue as well as to off-load the balance sheet.

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