25 August, 2021
A Procurement team that manages to keep costs in check, optimize payment terms, and help in efficient management of inventory would invariably help contribute to bottom line savings, which directly leads to shareholder value.
Raleigh, NC, Aug 25 -- The once-in-a-century disruption caused by the COVID-19 pandemic had thrown all well laid plans to the wind.
In the year of the pandemic, besides managing supplier and supply risks, Procurement Organizations were also tasked with achieving cost targets, which in turn depended on the company’s ability to maintain key manufacturing and supply arrangements, including recalibrating supply chains in some instances.
As the global economy marches towards normalcy, it has become quite apparent that these companies leaned heavily on the procurement function to weather the storm, a calling they have waited for years to respond to.
In a year when everything ranging from cost to contracts was re-examined, procurement played a crucial role in optimizing company supply chains as well as cost base. This was the year when they also searched for new suppliers, especially when faced with supply side financial risk.
A company’s supply base cannot be frequently reconstituted. At the same time, frequent cost fluctuations could end up affecting the company’s financial results; however, by their very nature, costs are always subject to fluctuations, particularly owing to price changes in commodities, raw materials, labor costs, transportation and energy, among others.
Procurement Organizations play an important role in managing a company’s cost base, as they largely work with third parties such as suppliers, distributors and contractors.
If procurement is unable to extract value from third party relationships—in the form of better costs and payment terms—it could negatively impact financial results.
In addition, maintaining a dynamic inventory management philosophy becomes paramount during times of crisis as it helps company conserve cash; idle inventory sitting in warehouses in case of a drop in demand is avoided.
Hence, a Procurement team that manages to keep costs in check, optimize payment terms, and help in efficient management of inventory would invariably help contribute to bottom line savings, which directly leads to shareholder value.
In order to identify the best performing procurement teams, Beroe had proposed a premise: companies that invest in their procurement teams and operations tend to create more shareholder value.
This can be demonstrated through Beroe’s Best-in-Class (BIC) Index. This year, too, the numbers show that cost-efficient companies have returned more value for their shareholders.
The constituent companies of the BIC Index are measured on four parameters where Procurement Organizations have a lot of influence:
BIC Index is basically a stock index, which measures the price performance of a basket of securities using a standardized metric and methodology. And this year too, stock prices of the 51 companies taken together in an Index have beaten the global benchmark indices of S&P 500, FTSE 100 and DAX.
This in a way answers the question: Can Procurement Function help create shareholder value? Yes, They Can!
To check the 2021 winners and access the full report, please click here: https://www.beroeinc.com/best-in-class-companies-2021/
Beroe is the world's leading provider of procurement intelligence and supplier compliance solutions. We provide critical market information and analysis that enables companies to make smart sourcing decisions — leading to lower costs, greater profits, and reduced risk. Beroe has been providing these services for more than 15 years and currently works with more than 10,000 companies worldwide, including 400 of the Fortune 500 companies. For more information about Beroe Inc., please visit https://www.beroeinc.com/.
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