What does the term 'added value' in procurement generally refer to?

The term 'added value' in procurement primarily refers to improvements that enhance operational efficiencies or reduce costs. This concept revolves around the idea that procurement activities should not simply focus on the cost of goods and services, but rather on how those goods and services can contribute to the overall effectiveness and efficiency of the supply chain and organization as a whole.

By focusing on added value, procurement professionals aim to identify opportunities to streamline processes, negotiate better terms with suppliers, develop stronger relationships, and implement innovative solutions that lead to cost savings or improved productivity. This not only includes cost reductions but also factors like improved quality, better service levels, and enhancements in sustainability practices. Essentially, added value signifies the benefits derived from effective procurement strategies that go beyond the immediate financial implications.

This understanding of added value is crucial for organizations looking to optimize their procurement processes, ensuring that every purchase or contract contributes positively towards the company’s goals.