Impact the Bottom-line
Cost reduction is typically the primary goal of most Strategic Sourcing initiatives, because savings in cost of goods sold (COGS)fall directly to the bottom-line. For example, let’s assume that a business reduces COGS by $1 million.
If that business has a 10%
margin on sales, it must sell $10 million worth of products to
achieve the same $1 million in reductions or savings. Again, every
dollar from reducing COGS comes directly off of the bottom-line.
This is critical in a business environment where it is more difficult to
increase revenues.