Value Adds

Value-adds address all those other benefits that may not be cash releasing but represent a business benefit, for example improved value from quality, service or delivery. When the procurement process is aligned with the strategic goals of the organisation, it is reasonable to expect that the impact on the business will include more value-adds. As an example, a franchise fuel retailer negotiates with a dry-cleaner a kiosk arrangement allowing customers a drop-off and collection service for their dry-cleaning at any of the member outlets. Via the procurement function, negotiations achieve an enhanced margin for the retailer, point of sale marketing material at no cost to the retailer and an exclusive ‘same day service’ guarantee. The last two are benefits adding important value to the retailer, but not through cost-savings or increased margins, they are value-adds that will result in an increase in frequency of customer visits and more sales of higher-margin products.