![How does the "profit lever effect" when using reverse auctions -2](https://i0.wp.com/roboga.ga/pics/1280x720/1/ How does the "profit lever effect" when using reverse auctions _1.jpg "How does the \"profit lever effect\" when using reverse auctions -1")
The effect of a profit arm on buying tells us that if your organization needs to find ways to reduce or contain costs, the best place to start is in the “Shopping” function. This is due to the high percentage of many organizations. total costs - in purchased goods and services. When cost containment becomes a strategic necessity, regardless of reduced sales or income, high labor costs, or other factors, companies too often focus on reducing costs in areas such as labor and overhead, rather than buying. Too often, it is thought that it is easier to carry out job cuts than to reduce procurement costs.
For example, on average in the industry 60% of all sales dollars are spent on purchased materials, and therefore small changes in the cost of purchased materials lead to large changes in profits. Therefore, if your business favors 10% of income from labor and wages and 25% of overhead costs, then your profit averages 5% in the industry. A five percent reduction in purchase costs will lead to a three percent effect on net income ~ (0.05 x 60% = 3%). This will increase your profit up to 8% from 5%, which will increase your profit by 60%. In conclusion, a 5% reduction in procurement costs will lead to an increase in profits of 60%.
Reducing your purchase costs will also help your company in a competitive competitive market. Your company will most likely lose its margin, as lower prices should compete in your market. If you can reduce your purchase costs, you can reduce prices without losing your profits.
Fortunately, electronic search technologies, such as reverse auctions, have become affordable, easy to implement, and are used by medium and small organizations to control purchasing costs.
While reverse auctions cannot be used to purchase everything, they can have a positive impact on the profitability of your company without resorting to painful decisions.
You can visit eDynaQuote http://www.eDynaQuote.com for examples of reverse auctions that companies have been successful with.
![How does the "profit lever effect" when using reverse auctions -2](https://i0.wp.com/roboga.ga/pics/1280/2/ How does the "profit lever effect" when using reverse auctions _2.jpg "How does the \"profit lever effect\" when using reverse auctions -2")
![How does the "profit lever effect" when using reverse auctions -2](https://i0.wp.com/roboga.ga/pics/1280/3/ How does the "profit lever effect" when using reverse auctions _3.jpg "How does the \"profit lever effect\" when using reverse auctions -3")
