Supporting activities and Procurement: How to improve profit margins

Photo by USAG-Humphreys, CC

Photo by USAG-Humphreys, CC

How often do you observe and measure your firms supporting activities.

Supporting activities mean everything on the side, that helps run your business but actually isn”t related to your product.

Yes you can make your supply chain network more cost effective, and you can work on redesigning your logistics operations to be faster. You can implement agile or lean supply chain networks with the best e-procurement software in the world.

As a global business, you”re going to continue improving your speed and revenue options. But there”s so much more to improving your profit margins aside from your primary activities.

Photo by Jean-Louis Zimmerman, CC

Photo by Jean-Louis Zimmerman, CC

Primary activities are anything that you do specifically to a product to get it in the hands of customers. When you develop your logistics ability to one-day delivery, you”re improving the value of your product to customers which can translate into improved profit margins. When you transform your customer service system from only email, to 24/7 email and calling, you are directly improving your product to a customer.

What should you do when you”re unsure of how to improve your primary activities? What should you do if your primary activities are fully optimized for performance?

Focus on your supporting activities.

These activities include implementing payroll procedures, internal communications structures, indirect procurement systems, etc. Some of the best supporting activities don”t cost much at all to roll out.

Photo by, CC

Photo by, CC

As a business leader you can purchase coffee that keeps your employees energized. You can buy your employees beer or take them out for lunch once a week to keep them happy and productive.

The old saying “A happy worker, is a productive worker,” has never been so relevant.

Support activities indirectly contribute to your business” success, but how? They don”t create products or services for sale, but they create systems and environments for improved quality.

Whereas not tracking your support activities can lead to massive losses, and even be your business” downfall. This can be as simple as not tracking spending accounts for non-essential items, or it can be as complicated as making it incredibly difficult for employees to find help.

However with correctly designed support activities, you will increase your profit margins by either moving faster or spending less. An example is when better inter-communications systems can lead to faster response rates between management and team-members. Which then translates into faster production times.

One way of improving your business” support activities can be through innovative procurement software. Procurement software can be flexible enough to involve key activity procurement as well as indirect procurement acquisitions.

A second method of improving your business” support activities is by creating better business processes. A good process does not have to involve new tech or equipment. A process can be changing the way business members communicate.