# Every dollar saved by procurement goes directly into profit! ## Leverage the effects of procurement #permanentnote ## Source - [[training - Strategic cost management]] ## Keywords (topics and howto) - [[topic - supply chain]] - [[how to be a better advisor]] - [[how to be a better leader]] ## Relevant notes - [[zt - revenue is cost plus profit]] ## Notes - **Every dollar saved by procurement goes directly into profit!** ## example Scenario: Revenue = - profit is 5% - external costs are 60% - value add is 35% A reduction of costs by 2% will increase profit by 1.2%, creating a **24%** profit growth. in numbers - $1000 revenue - profit: $50 - external costs: $600 - value add: $350 if we reduce the costs by 2% from $600 to $588, the profit moves from $50 to $62 is a 24% increase.