In the eighties, purchasing was

* Perceived as clerical activities, and back-office function.

* Seen as ‘the buyers’ within the Operations Department.

* A simple clerical task that could be done by anyone.

* Seen as a corporate backwater.

* Not seen as a strategic function.

Average total material cost was about 65% of the product sale price then.

Now, it is important to provide cost effective products and services to customers. 

Currently average total material cost has increased to about 70 ~ 85% of product sale price depending on the industries. On average, engineering achieves 2~3% cost savings through productivity gain, waste reduction and improvement on quality and yield. 

An effective supply chain program can achieve 10~40% cost savings and high inventory turns. Many companies have committed many resources in improving sales and enticing customers but insufficient resources and commitment in optimizing supply chain. 

Using $100 as total sales with 5% net profit as an example, a $1 increase in revenue would only translate to improved profits of $0.05; whereas $1 saving in materials cost is equivalent to a $20 sale done!

It is almost impossible to be a market leader without firm and effective supply chain strategies and framework.