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I believe that technically speaking SC cannot be turned into a Profit Center but at the same time it goes without saying that through reduction in costs and improving deficiency, it can help other profit centers to produce better results.
Supply Chain is not a cost center, it's an investment for which better visibility will lead to better control and for which successful implementation of continuous process improvements will ultimately results into return on investment with great profits and more efficiency. It's easier to write than doing it though ;-)
1. By reducing cost expenses in warehouse operation
2. Negotiate for better freight rates and transportation charges
3. regular maintenance of equipment's / vehicle instead of getting new ones
4. maximize work productivity and less human resources utilization
5. Electricity, water, stationary, papers and office devices with proper usage
Cost Center is the area of responsibility where direct and indirect costs are charged in order to control the cost. In cost center we measure performance by deducting Actual Cost from Standard Cost.
Profit Center is the area where performance measurement can be done through its revenue earning capacity in order to maximize it, is known as Profit Center. In profit center we evaluate performance by deducting Actual Cost from Budget Cost.
The operational area of cost center is limited whereas for profit center it is wider. The cost center is responsible to minimize the cost but the profit center is responsible for both cost and revenue.
Therefore the SC Cost Center in an organization is also profit center but all the profit centers are not the cost centers. The more you reduce the cost through cost center the more you play role to maximize revenue.
KPI's and targets has to be put. While you have an initial spending plan you need another cost-cutting plan that compare achievements of costs reduction. This will show how good the team is in negotiations.
Thanks for invitation, I fully agree with the answer by Mr. Nadeem Asghar.
Thank for the invitation,
I Agree with Both answers provided by Mr. Nadeem Asghar & Mr. Shaik Alavudeen
By dealing with the following factors:
Then We will be able to improve our company profits.
Use Supply Chain as USP - unique selling point.
Reach clients in better customer service way.
Hello,
I believe this should start with a good planning and setting targets / KPI's, the below is just a list that may be included in the plan:
1> Establish target purchase cost,
2> using purchasing techniques special for the volume quantity, Blanket purchase order, partial delivery purchase order in order to achieve minimum investment in buying.
3> better terms and conditions in issuing purchase order.
4> establish strategic partners
5> effective logistic - this include freight, transportation and deliveries.
6> Improving stocking level.
7> minimizing the non-adding value operations.
8> automation
Best Regards
Only the legal entity can show a profit. All functions contributing are generating cost on the P&L. Trying to make all functions internal profit centers, probably by outsourcing these services into a separate legal entity of Shared Services does not change the P&L situation.
It is true that SC is a cost center. SC spends, forecast expenditure and finally uses money (YES, it's true in all orders) but what "profit centers" need to fully understand is that there are many ways of spending: you can spend less for a less great service / product quality, you can spend more if your Opex / Capex budget was far from being realistic. Yes, we are a cost center but if you follow our advice , forecast you will always spend but much less especially on the long run. This is spend smart method. Not enogh space to elaborate ;)
