Turn Procurement from a Cost Centre into a Revenue Driver

Turn Procurement from a Cost Centre into a Revenue Driver

Procurement isn’t just about squeezing costs. Done well, it creates revenue through supplier-led innovation, faster time-to-market, and rock-solid supply continuity.

Our new paper shows executives how to:

  1. Align procurement goals directly with growth targets
  2. Co‑create new offerings with strategic suppliers
  3. Protect sales by engineering resilience into the supply base
  4. Use data and market insight to “monetise volatility”
  5. Evolve talent, metrics, and culture beyond cost alone

We  inluded a case study and practical steps you can take immediately.

In many organisations, procurement is viewed as a back-office function whose main job is to control spending. Traditional procurement teams have often been seen as cost centres, expected to squeeze suppliers for the lowest price and little more. Executives outside the function might roll their eyes at procurement as a bureaucratic hurdle – a department that issues purchase orders and enforces compliance, but doesn’t visibly contribute to growth. This perception has meant procurement teams frequently feel they must prove their worth to the organisation.

However, forward-thinking businesses are now discovering that procurement can be so much more. With the right approach, strategic procurement decisions can directly drive revenue growth, not just reduce costs. Instead of only focusing on penny-pinching, procurement can become a creator of value – a source of innovation, competitive advantage, and top-line impact. In fact, some of the most progressive Chief Procurement Officers (CPOs) make it their mission to use procurement’s influence and supplier relationships to deliver top-line revenue gains. In short, procurement can transform from a transactional support function into a strategic revenue driver for the business.

In this paper, we will explore how to make that transformation a reality. The tone is practical and conversational – this is about real-world steps, not abstract theory. We’ll discuss why the traditional view of procurement as a cost centre is outdated, and outline actionable strategies to reposition procurement as a value-adding partner in driving growth. We’ll look at how aligning procurement with business goals, leveraging supplier innovation, ensuring supply stability, and empowering procurement talent all contribute to the top line. To illustrate these concepts, we include a real-world case study demonstrating procurement’s role in revenue generation. By the end, you should have a clear roadmap for turning your organisation’s procurement function into a revenue-generating strategic driver.

From Cost Centre to Strategic Partner

Why has procurement traditionally been seen as a cost centre? The reasons are rooted in how companies have measured and engaged the function. Procurement’s benefits – like long-term cost avoidance, improved quality, or risk mitigation – often appear intangible or “soft,” whereas its operating costs (staff, systems) are very tangible. When procurement works quietly in the background, its wins may not be obvious to other departments. For example, if procurement negotiates a 5% cost reduction in a contract, that savings might just be absorbed into margins and never explicitly credited as procurement’s achievement. Meanwhile, the organisation clearly sees the procurement headcount and technology expenses on the budget. This imbalance makes procurement look like a net cost, unless you dig deeper.

Furthermore, procurement has often been kept at arm’s length from core business planning. In many companies, major decisions – launching a new product, entering a new market, designing a marketing campaign – are made by business units or R&D, with procurement only called in at the last minute to “get the deal done” or check compliance. This late engagement leaves little room for procurement to add value; they are just executing decisions already made. It’s no wonder in such scenarios that procurement is seen as tactical paperwork rather than a strategic partner.

The key to changing this perception is to elevate procurement’s role from the outset. Instead of treating procurement as merely a support function, organisations should treat it as an integral part of strategy formulation and execution. In practice, this means giving procurement a seat at the table in executive discussions. Encouragingly, this shift is already underway in leading companies. As one manufacturing CPO put it, “Never before has procurement been core to so many executive-level priorities. We now have a real seat at the top table… this is how we will operate going forward”. CEOs, too, are recognising that procurement is “absolutely critical” to performance. When procurement is involved early – for instance, contributing insights on supplier capabilities during product development or providing market intelligence during strategy setting – it can shape outcomes in ways that drive revenue, not just cut costs.

Critically, we must change how we measure and incentivise procurement. Traditional procurement KPIs like “cost savings achieved” or “number of contracts negotiated” reinforce the cost-centre mindset. If all a CPO is celebrated for is cutting 10% from the spend, then naturally that’s where they’ll focus. To turn procurement into a revenue driver, executives should expand procurement’s performance metrics to include value-oriented outcomes: contribution to new product launches, supplier-led innovation ideas, percentage of spend with strategic partners, supply chain uptime, and even revenue or margin impact of procurement initiatives. As we’ll discuss, some organisations have defined new “currencies of procurement” beyond cost savings – such as ensuring supply continuity for growth and collaborating with sales to improve margins – which help position procurement as a true strategic function.

In summary, moving from cost centre to strategic partner involves a mindset shift at the leadership level. It means actively positioning procurement as a value creator. When executives treat procurement as a source of competitive advantage – not just a team to knock prices down – the function is empowered to contribute to big-picture goals like revenue growth, innovation, and market expansion. The following sections outline how, in practical terms, procurement can directly impact the top line and what steps leaders can take to enable this transformation.

Align Procurement with Growth Objectives

The first actionable step is to align procurement’s goals with the organisation’s growth objectives. This sounds obvious, but it’s a fundamental change: procurement should be driven not only by cost efficiency, but by what the business is trying to achieve in the market. Too often, procurement operates on its own island with targets like “save £5 million this year.” Going forward, those targets should connect to broader goals – for example, “support the launch of Product X in Q4” or “enable expansion into Asia-Pacific market by securing reliable local suppliers.”

To do this, procurement leaders need to be in sync with corporate strategy. They should understand the revenue plans and where the company expects growth to come from. For instance, if a company’s strategy is to grow 20% in a certain product line, procurement should be asking: do we have the supplier base to support that? Can we source the new materials or components required? Are there supplier innovations that could make the product more attractive? By aligning their objectives, procurement can make purchasing decisions that directly support sales and revenue.

One practical tip is to cascade business goals into procurement KPIs. If the organisation prioritises customer experience to drive sales, procurement might set a goal to source higher-quality materials or more reliable service providers, even if they’re not the cheapest, because that quality will enhance customer satisfaction and repeat business. If speed to market is crucial for revenue, procurement might emphasise reducing supplier lead times and onboarding alternate suppliers to avoid delays. In short, every major business KPI – whether it’s revenue growth, market share, product innovation, or sustainability – can have a mirror in procurement’s objectives. This ensures procurement is rowing in the same direction as the revenue-generating parts of the company.

Additionally, highlight procurement’s contributions to those goals. Communication is key. Executives should hear not just about how much money procurement saved, but how procurement enabled growth. Did procurement secure a new supplier that allowed a faster product launch, yielding additional sales this quarter? That needs to be articulated. Did a procurement negotiation with a logistics provider improve delivery times, boosting customer satisfaction scores? Make sure that story is told. As a procurement blog noted, sharing case studies and examples internally – for instance, how a procurement initiative improved operations or the bottom line – helps other departments see procurement’s strategic impact. A little internal marketing of procurement wins can shift perceptions and encourage earlier engagement of procurement in new projects.

Executive support is vital here. Senior leadership can accelerate this alignment by explicitly stating that procurement is expected to drive value, not just cut costs, and by advocating for procurement’s early involvement in initiatives. When a CEO or CFO asks in meetings, “Have we looped in procurement on this new venture?” it sends a message that procurement’s role is to help make the venture successful, not just to sign off on the supplier contract at the end.

In summary, aligning procurement with growth objectives means knitting procurement into the fabric of strategic planning. It ensures that when the company chases revenue opportunities, procurement is right there as an enabler. With goals and metrics tied to business outcomes like revenue, procurement begins to act – and be perceived – as a growth partner. This sets the stage for the more specific ways in which procurement can drive revenue, which we’ll explore next.

Leveraging Supplier Collaboration for Innovation and Revenue

One of the most powerful ways procurement can fuel revenue growth is by leveraging suppliers as a source of innovation. No company has a monopoly on great ideas; suppliers, who are experts in their own products and technologies, can often contribute fresh solutions, product improvements, or even co-develop new offerings that generate sales. Procurement is uniquely positioned to tap into this external innovation.

Consider that a significant portion of innovation in many industries actually comes from outside the organisation’s four walls. Research shows that over half of innovations are sourced externally – through suppliers, partners, or acquisitions. Procurement, by virtue of managing supplier relationships, can act as the bridge between these external ideas and the company’s internal needs.

To turn this into a revenue driver, procurement should foster a culture of supplier collaboration rather than adversarial negotiations. If a procurement team is only known for hammering suppliers on price, suppliers have little incentive to bring their best ideas to the table. On the other hand, if procurement builds strong, trust-based relationships, suppliers will be more willing to share innovations or tailor solutions for the company’s benefit. A CPO of an industrial company even remarked that the role of procurement is evolving into a kind of “chief partnership officer,” serving as a knowledge broker between the company and its suppliers. In this view, procurement connects internal teams with external expertise, creating value through collaboration rather than just contracts.

Practically, procurement can set up programs to harvest supplier innovation. This might include regular business reviews not just about performance, but about brainstorming new ideas; inviting key suppliers to innovation workshops with your R&D and product teams; or creating a formal supplier innovation program where suppliers are encouraged to submit ideas that could grow both businesses. For example, some companies hold “supplier days” or innovation summits where top suppliers are briefed on the company’s strategy and innovation needs, and suppliers in turn pitch concepts or technologies that could meet those needs.

A real-world illustration comes from Kellogg’s, the global cereal and snacks company, which treated supplier innovation as a strategic priority. Kellogg’s launched an open innovation initiative through its procurement function, aimed at breaking the traditional buyer-supplier mindset. They worked with key suppliers to find new product and improvement opportunities, setting up cross-functional teams to nurture these ideas. Notably, Kellogg’s procurement segmented innovation opportunities into two tracks – one focused on revenue-generating ideas (new products, new features, etc.) and another on cost savings. They even developed separate processes for each: one-on-one meetings with suppliers for the revenue track (to really dig into joint growth ideas), and a more open portal for cost-saving suggestions. This approach led to tangible successes. By collaborating closely with suppliers – treating them as partners vested in Kellogg’s growth – the company was able to bring new innovations to market. In effect, procurement directly contributed to new revenue by being the conduit for supplier-derived product ideas. Kellogg’s case underlines a powerful lesson: supplier collaboration can directly drive top-line value, not just bottom-line efficiency.

The Kellogg’s example also highlights something important: aligning incentives. They made sure that on the supplier’s side, the people involved in innovation discussions were not just sales account managers (who are usually focused only on pushing more volume), but relationship managers and technical experts who cared about mutual success. Internally, they formed cross-functional teams (procurement, R&D, quality, etc.) to evaluate and advance the ideas. This meant procurement was leading a coordinated effort to turn supplier ideas into real market offerings. The result is a win-win: the supplier gets more business or a new revenue stream, and Kellogg’s gets innovative products that drive sales.

Executives looking to replicate this should ensure their procurement teams have the bandwidth and mandate to pursue supplier-enabled innovation. It might mean freeing up some time from day-to-day tactical buying to focus on strategic supplier development. It also might require upskilling – procurement staff may need training on how to conduct innovation workshops or how to handle intellectual property discussions with suppliers if co-developing products. But the investment is well worth it. Some organisations report that products or enhancements arising from supplier innovation programs contribute significant new revenue – and often faster or cheaper than if the company tried to innovate entirely in-house.

In summary, suppliers can be growth partners. Procurement can unlock this by shifting from a mindset of squeezing suppliers to one of co-creating with suppliers. By doing so, procurement directly impacts revenue: it brings in new features and products that attract customers, differentiates the company in the market, and even opens up new markets – all sources of top-line growth.

Ensuring Quality and Supply Stability to Boost Sales

Another critical way procurement drives revenue is by ensuring the company can consistently deliver quality products and services to customers. At first glance, quality assurance and risk management sound like operational concerns, but they have direct revenue implications. If you can’t deliver on your promises to customers – say, a product is out of stock, or it fails to meet expectations – you lose sales and risk losing future business. Procurement, by managing the supply base, plays a pivotal role in preventing those scenarios and thus protecting (and enhancing) revenue.

Quality enhancement is a prime example. Procurement teams that source from high-quality, reliable suppliers help ensure the end products are of superior quality. This leads to satisfied customers, repeat purchases, and a strong brand reputation that attracts new customers. Conversely, if procurement chooses a subpar component because it was the cheapest, and that component causes product failures or quality issues, the company might face returns, warranty claims, or brand damage – all hitting revenue. Many executives can recall cases where a supply issue (like a faulty part or ingredient) led to sales losses or expensive recalls. By prioritising quality in sourcing, procurement is effectively working to safeguard the revenue stream that comes from happy customers.

Supply continuity (or resilience) is equally important for revenue. In an era of global supply chain volatility – whether from pandemics, geopolitical events, or natural disasters – procurement’s ability to secure supply can make the difference between meeting customer demand or missing out on sales. Procurement can drive a resilience strategy by diversifying the supplier base, qualifying backup suppliers, and monitoring supply chain risks. For instance, if one supplier of a critical material is in a region prone to disruption, a strategic procurement approach would find alternate sources in other regions or hold strategic stock. Yes, these measures might sometimes increase short-term costs, but top companies are recognising that they’re willing to accept a bit higher cost to restructure the supply base for more resilience. That’s because the cost of not having product to sell (stockouts) or failing to deliver to customers can be far greater in lost revenue and lost loyalty. A chief financial officer of an agrochemical firm noted they would even tolerate higher costs in the short term to ensure supply security, precisely to protect the business’s ability to generate revenue reliably. In other words, procurement’s job is not just to get the cheapest deal – it’s to get the most dependable deal that supports continuous sales.

To make this concrete: imagine a retailer gearing up for the holiday season (a peak sales period) and a key product is a new gadget. If procurement has secured multiple suppliers for the gadget’s components and closely coordinated with them, the retailer can stock enough to meet the holiday rush and not run out on Black Friday. That directly translates into maximised sales. On the flip side, if procurement had single-sourced a critical part from a supplier that then had a factory fire, and there’s no backup, the gadget might go out of stock in December – meaning lost sales and disappointed customers. The revenue impact is obvious.

Procurement can also influence revenue through speed and flexibility. By optimising lead times and responsiveness in the supply chain, procurement helps the company react faster to market demand. If marketing suddenly needs to double the order of a promotional item because a campaign is wildly successful, an agile procurement function with flexible supplier agreements can make it happen – capturing extra revenue that would otherwise be missed. Similarly, if consumer trends shift and there’s an opportunity for a new variation of a product, procurement’s quick action in sourcing new materials or suppliers can get that variation to market ahead of competitors, grabbing market share.

In sum, procurement acts as the guardian of supply and quality, which is fundamental to revenue. Ensuring you have the right goods, of the right quality, at the right time means you can sell what you plan to sell (and perhaps more). This is why modern procurement metrics include things like supply availability, supplier lead time, and quality KPIs – not just cost. When procurement excels in these areas, it not only avoids revenue losses, it actively builds the company’s reputation for reliability and excellence, which in turn fuels sales growth. As one procurement expert succinctly put it: procurement can provide a “durable competitive advantage” by strategically securing scarce materials and maintaining supply chain flexibility. That competitive edge shows up in the top line, through higher volumes and customer trust.

Using Data and Market Insights for Top-Line Impact

Data is often called the new oil, and procurement sits on a gusher of supply market data. In the digital age, a strategic procurement function can harness analytics and market intelligence to drive revenue-enhancing decisions. This is a newer frontier, but incredibly promising: by analysing supplier data, market trends, and even AI-driven predictions, procurement can help the company stay ahead of the curve (and the competition) in ways that boost sales.

One aspect is anticipating market shifts. Procurement often has early visibility into commodity trends, supplier cost changes, and emerging technologies. By sharing these insights with the rest of the business, procurement can inform product pricing or timing decisions that maximise revenue. For example, if procurement’s analytics indicate that a key raw material is likely to spike in price next quarter, that information is gold for both finance and sales teams – perhaps the company can secure inventory now (through procurement action) and even consider adjusting pricing or promotions before competitors do. Conversely, if prices are dropping, procurement can help the business capture that upside – maybe by negotiating longer-term contracts at the lower price and then advising sales to run a promotional campaign thanks to improved margins. In other words, procurement can “monetise volatility” by being predictive and agile. A pharma industry CPO noted that procurement’s ability to adapt to volatile markets and actually turn that uncertainty into opportunity will be crucial for success. If you know something about the supply market before others do and act on it, it can directly translate to a competitive sales advantage.

Another data-driven opportunity is identifying new revenue opportunities through spend analysis. By digging into what the company buys, procurement can sometimes spot untapped opportunities. Perhaps the company is buying a particular component that could also be assembled and sold as an aftermarket product, suggesting a new revenue stream. Or procurement’s analysis of purchasing patterns might reveal that a certain supplier also distributes products in a region the company hasn’t entered – indicating a partnership that could open a new market. These are the kinds of insights that come from not viewing procurement data in isolation. Modern tools (AI, machine learning, etc.) can crunch through procurement and market data to find patterns and suggest actions. For example, advanced analytics can create a “single source of truth” for external costs and supplier data, helping to pinpoint where value can be gained. If less than 20% of available procurement data is being used today (as many CPOs admit), imagine the revenue-related insights lying dormant in the other 80%. By investing in procurement analytics platforms, companies can uncover those hidden gems.

Digital procurement tools also contribute to revenue indirectly by freeing up procurement professionals’ time from low-value tasks. Automation of routine purchasing (say, via e-procurement catalogues or even AI “bots” handling simple orders) means the procurement team can focus more on strategic activities that drive revenue – like sourcing for a new product line or collaborating with a business unit on a growth project. One leading practice is deploying autonomous procurement for tail spend – using algorithms to handle the small, miscellaneous purchases – thereby freeing human talent to work on high-impact sourcing and supplier relationships. This is akin to having your team spend less time processing paper and more time thinking how to win in the market.

A great example of leveraging data is seen in companies that use dynamic procurement strategies in tandem with dynamic pricing. Some supply chain leaders are experimenting with dynamic pricing models (especially in industries like retail or airlines), which require constant adjustment of prices based on demand and supply factors. Procurement can feed into this by dynamically adjusting sourcing – for instance, if demand surges for a product, procurement’s systems might automatically trigger orders from secondary suppliers or adjust contracts to ensure supply meets the surge, enabling sales to capitalise on every bit of demand. It’s a coordinated dance of data: pricing, demand sensing, and supply response. Done well, it maximises revenue and minimises lost sales.

For an executive audience, the takeaway is: don’t silo your procurement data. Integrate procurement into your business intelligence efforts. The insights about costs, suppliers, and markets that procurement gathers can inform strategy far beyond the procurement department. Empower your CPO with the tools and analytics talent to crunch that data and bring forward opportunities. When procurement identifies that a certain supplier’s new technology could give your product a differentiating feature, or that shifting sourcing to a different region could allow you to enter that market with local credence, those are strategic nuggets that drive growth.

In conclusion for this section, procurement in the digital era can be an insight engine for the company. By leveraging data and market intelligence, procurement moves from a reactive role to a proactive one – spotting chances to grow revenue and advising the business accordingly. This is part and parcel of procurement’s evolution into a true strategic function.

Empowering Procurement Teams and Culture for Growth

Transforming procurement into a revenue driver isn’t just about processes and tools – it’s fundamentally about people and culture. Procurement professionals need the right skills, mindset, and empowerment to operate in this strategic capacity. After all, it’s people who build supplier partnerships, spot innovation opportunities, and collaborate with internal teams to drive revenue.

Firstly, consider the skill set of the procurement team. The traditional procurement skill profile emphasised negotiation, contract management, and cost analysis. Those remain important, but new skills are needed to drive broader value. The “buyer of the future,” as some have termed it, is a hybrid of traditional procurement expertise and new capabilities in analytics, strategic thinking, and collaboration. They are digitally fluent, able to harness data to make decisions, and comfortable working cross-functionally. They also understand the business’s products and customers, not just the procurement process. For example, a procurement manager who deeply understands what drives customer choice in your product can make sourcing decisions that enhance those product attributes, which in turn drive sales. Leading companies are investing in developing these skills – training their procurement teams in areas like data analysis, or even recruiting talent from business units or from analytics backgrounds into procurement roles. The CPO of a tech company highlighted that procurement pros must become much more digitally adept – learning to ask the right questions of data and use it to be “more surgical” in supplier selection and performance management. This kind of analytical and strategic savvy in procurement staff directly supports the revenue-driving agenda.

Next, empowerment and leadership matter. Procurement teams can only drive strategic value if they are empowered to do so by the organisation. This means senior leadership must give procurement the mandate to look beyond price and take calculated risks in the name of value. It might mean allowing procurement to choose a slightly higher-cost supplier because it offers a big innovation opportunity or better reliability – and not punishing them for that decision, but rather evaluating the success in terms of revenue or long-term value. It also means involving procurement leaders in key decisions. A CPO cannot contribute to revenue strategy if they only hear about a new product launch two weeks before market rollout. So, empowerment is also structural: ensure the CPO or procurement head is part of the executive circle, and that there are forums for procurement to provide input on product development, marketing, and other growth plans.

Culturally, the procurement team should be encouraged to think like entrepreneurs or “value entrepreneurs,” as McKinsey puts it. Instead of a narrow focus on cost, an entrepreneurial procurement team is curious, looks for new value streams, and is willing to collaborate in unorthodox ways to achieve business outcomes. For instance, such a team might proactively scout for start-ups or new entrants in the supply market whose offerings could give their company an edge, essentially playing a business development role. Or they might propose new business models with suppliers, such as revenue-sharing arrangements or joint ventures, which could open up new profit avenues. When procurement folks start thinking beyond the confines of procurement processes and more about business success, they become true partners in revenue generation.

One cultural shift that supports this is moving procurement from a policing role to a partnering role internally. Historically, other departments might see procurement as the spend police – enforcing rules, slowing things down. To unlock revenue impact, procurement needs to be seen as a helpful collaborator. That requires relationship-building by procurement staff with marketing, sales, operations, R&D and others, showing that “we’re here to help you succeed, not just to say no to your preferred supplier.” Techniques like collaborative communication (regular updates to business units, seeking feedback and acting on it) go a long way. When business units trust procurement, they’ll bring them in early, and that’s where procurement can really contribute to shaping solutions that sell.

Finally, let’s not forget incentives and recognition at the team and individual level. If you want procurement people to focus on revenue, make it part of their bonus criteria. Some companies have started including metrics like internal client satisfaction or contribution to product success in their procurement staff evaluations, alongside savings. Additionally, celebrate wins where procurement played a role in revenue growth. If a new product launch was hugely successful thanks in part to a supplier’s innovation or timely sourcing, call that out and acknowledge the procurement team. That positive reinforcement signals to everyone that procurement’s strategic contributions are valued on par with, say, a big sales deal closed or a marketing campaign’s success.

To summarise, empowering procurement as a revenue driver is about people and culture. Equip your team with the skills for strategic procurement (data, business acumen, innovation). Give them the organisational clout and early involvement to act strategically. Foster a culture of partnership and innovation within procurement. When the team feels empowered and is capable, they naturally move from a narrow cost-cutting focus to a broad value-driving mindset. In that environment, procurement truly becomes a catalyst for revenue growth, as the following case study will demonstrate in a concrete way.

Case Study: Procurement as a Revenue Catalyst in Action

Case Study – Kellogg’s: From Sourcing Ingredients to Sourcing Innovation

To illustrate how procurement can directly drive revenue, let’s look at Kellogg’s, the well-known food company, and how it transformed its procurement approach to spur innovation and growth. Kellogg’s story demonstrates that even in a legacy industry like food manufacturing, procurement can break out of the cost-centre mould and become a catalyst for new revenue.

The Challenge:

Kellogg’s recognised that many good ideas for new cereals and snacks could come from outside the company – particularly from its suppliers. Ingredients, packaging, processing equipment – these are all developed by suppliers, and new developments in those areas could translate into novel products or improvements for Kellogg’s. Traditionally, however, Kellogg’s procurement relationships were transactional. There was limited information sharing and trust with suppliers. The focus was on negotiating deals and managing supply, not on collaborative innovation. Both Kellogg’s and its suppliers sensed there was “huge potential for innovation” that they were leaving on the table. Kellogg’s leadership made “Open Innovation” a top initiative, meaning they wanted to open up the company to external ideas. The procurement team had a mandate to change the way they engaged suppliers in order to find those next big product ideas.

The Approach:

Debbie Maners, Kellogg’s Vice President of Global Procurement at the time, partnered with a consultancy (Vantage Partners) to develop a formal Supplier Innovation Program. They appointed a seasoned procurement director, Cathy Kutch, to lead the initiative – signalling that this would be driven from within procurement, not siloed in R&D. The program began by resetting the buyer-supplier relationship climate. They surveyed internal stakeholders and key suppliers to diagnose the current state. The findings were what they expected: interactions were bogged down by the usual buyer-vs-seller dynamics, with limited sharing of each other’s needs and capabilities. Trust was low. To change this, Kellogg’s did a few crucial things:

  1. Built Collaborative Relationships: They identified a set of strategic suppliers and worked on strengthening those relationships beyond the transactional level. This meant more frequent communication, executive-to-executive engagement, and discussing long-term opportunities, not just current contracts. Importantly, Kellogg’s asked suppliers to assign senior relationship managers to these discussions, rather than salespeople focused solely on short-term orders. This set a tone of partnership – the conversations were about how both sides could invest and win together.
  2. Created Joint Innovation Teams: Kellogg’s set up cross-functional teams which included procurement, R&D, and quality staff from their side, and relevant experts from the supplier side. These teams ran in parallel to Kellogg’s regular supplier relationship management. Essentially, while one part of procurement managed the ongoing supply, these special teams zeroed in on innovation ideas. They “planted the seeds” by clearly articulating Kellogg’s innovation priorities to suppliers – e.g., healthier ingredients, sustainable packaging, new flavours, etc. – and encouraging suppliers to propose solutions.
  3. Two Innovation Tracks – Revenue & Cost: A key insight was to treat revenue-focused innovation differently from cost-saving ideas. Kellogg’s segmented innovation opportunities into two tracks: (1) Revenue and (2) Cost Savings. For revenue-generating ideas (like a new product formulation or a new package that could boost sales), they held one-on-one meetings with suppliers to discuss and develop these concepts in a confidential, deep-dive manner. For cost-saving ideas (process improvements, waste reduction, etc.), they used a supplier portal where any supplier could submit suggestions, since those were less sensitive. This separation ensured that big potential product ideas got the focused attention they deserved, while efficiency ideas were still captured systematically.
  4. Structured Evaluation and Execution: Not every idea was going to be a winner, so Kellogg’s put in place a process to evaluate and prioritise innovation ideas. They developed criteria to assess feasibility, potential payoff, and alignment with company strategy. Once a promising idea was identified and approved, they made sure to assign dedicated project teams (including both Kellogg’s and supplier personnel) to bring it to market. For example, if a supplier suggested a new type of ingredient that could create a high-protein cereal, the team would include that supplier’s food scientist and Kellogg’s product developers and buyers to work out formulation, testing, supply ramp-up, etc. The cross-functional nature of these teams was critical – it wasn’t just thrown over the fence to R&D; procurement stayed involved to manage the supplier relationship and commercial aspects throughout development.

The Results:

Kellogg’s supplier innovation program yielded concrete benefits. While specific product details are proprietary, we know from reports that this collaborative approach led to new product ideas making it to market, as well as improvements in existing products, directly tied to supplier input. By having a “revenue track” for innovation, Kellogg’s essentially created a pipeline of ideas aimed at boosting sales. Procurement’s role was central – they facilitated the connections, nurtured the relationships, and ensured the good ideas were not lost in bureaucratic shuffle. The culture change was also notable: suppliers began to see Kellogg’s as a partner that valued innovation, not just a negotiator of cereal ingredient prices. Internally, other departments started to see procurement in a new light – as a team that could drive projects leading to new sales, not just a team that cuts costs on packaging.

This case study demonstrates the concept in practice: procurement shifted from a cost focus to a value focus. The procurement team still cared about cost (they had a separate track for it, after all), but they broadened their mandate to include revenue growth. The direct impact was new products on shelves and improved offerings, which translate to top-line growth for Kellogg’s. It’s a powerful example of moving procurement up the value chain: from sourcing commodities to sourcing innovation.

For other organisations, the Kellogg’s story is a great proof-of-concept. Whether you’re in food, tech, manufacturing, or services, the principles hold: engage suppliers as partners, create structured ways to collaborate on innovation, and align the procurement team’s efforts with revenue outcomes. The exact mechanics might differ (not every company will do one-on-one meetings vs portals, for instance), but the core idea is universal – procurement can be a catalyst for growth when it orchestrates the creativity and capabilities of the supply base.

Actionable Steps to Transform Procurement into a Revenue Driver

Turning your procurement function from a cost centre into a revenue driver is a journey. It requires changes in strategy, process, and mindset. Here are some actionable steps that executives can use to lead this transformation:

  1. Set a Vision and Communicate It: Clearly articulate to your organisation that procurement’s role is expanding to include value and revenue generation. Communicate from the top that procurement should seek opportunities to contribute to growth. This vision setting is crucial to break old stereotypes. For example, announce goals not just for cost savings, but also for things like “number of supplier innovation ideas implemented” or “revenue impact from procurement initiatives.” This gives everyone permission to think beyond cost.
  2. Align Metrics and Incentives with Value Creation: Revise procurement KPIs to include growth-oriented metrics. Continue to track savings, but add measures such as support for new product launches, reduction in time-to-market, supplier quality improvements, customer satisfaction related to supplier performance, and so on. Importantly, tie some of these metrics to procurement team incentives. If a portion of a procurement manager’s bonus depends on successful introduction of a supplier innovation or on maintaining supply continuity during peak sales periods, their daily focus will shift accordingly. “What gets measured gets done” holds true – measure procurement by value delivered, not just money saved.
  3. Involve Procurement Early in Strategic Decisions: Create processes where procurement is brought into planning for new initiatives from the beginning. If there’s a product development stage-gate, make sure one of the checkboxes is “Procurement engaged”. If marketing is planning a big campaign with a new vendor or merchandise, loop procurement in early. Early involvement allows procurement to shape solutions (suggest alternative approaches, find better suppliers) rather than just execute decisions. It also helps avoid the scenario where procurement is forced to choose between fast and cheap; early involvement lets them achieve both the best value and timely delivery, supporting the project’s revenue goals.
  4. Invest in Supplier Relationships: Identify your key suppliers – those whose goods or services critically affect your revenue, or those who have potential to innovate with you – and invest time and resources in those relationships. This could mean regular executive meetings, joint business planning, even inviting suppliers to your internal strategy days. The goal is to move from one-off transactions to long-term partnerships. When suppliers feel valued and understand your business goals, they are more likely to prioritise you with capacity, share innovations, and align their growth with yours. Essentially, you become a customer of choice, which can lead to preferential treatment such as early access to new technologies or first allocation when supply is tight – clear revenue enablers.
  5. Encourage and Formalise Supplier Innovation: Don’t leave supplier-driven innovation to chance. Set up formal mechanisms to capture it. This might be an innovation portal, a supplier award programme for innovative ideas, or periodic innovation workshops. Signal to suppliers that you welcome ideas that can drive revenue or efficiency. Also, be prepared to reward suppliers for successful ideas – whether through recognition, longer contracts, or a share in the success. When Kellogg’s separated innovation into revenue and cost tracks, they essentially acknowledged the importance of both and managed them intentionally. Do the same: have a plan and owners for fostering innovation in your supply base.
  6. Build Procurement’s Internal Partnerships: Within your company, strengthen the ties between procurement and other departments. Procurement should work hand-in-hand with R&D on new product development, with operations on supply planning, with finance on cost and investment decisions, and with sales/marketing on understanding customer needs. Consider cross-functional teams for major initiatives (like a product launch team that includes a procurement representative). This collaboration ensures procurement decisions are made in context of revenue goals. As McKinsey noted, joint governance among sales, R&D, and procurement can propel top-line strategies when they work together on product mix and pricing decisions.
  7. Empower Procurement to Make Strategic Decisions: Review your approval workflows and policies to ensure they’re not hampering strategic procurement moves. For example, if procurement wants to approve a slightly higher cost supplier because it’s more innovative or reliable, is that allowed or do rigid policies prevent it? Empower the CPO with the discretion to pursue long-term value. This might also mean budget flexibility – allowing procurement to invest in things like supplier development or technology that have a growth payoff. An empowered procurement function acts more entrepreneurially and can respond faster to opportunities.
  8. Develop Talent and Skills: Assess your procurement team’s skills and fill the gaps. Provide training in areas like data analytics, negotiation for value (not just price), and supply market research. Hiring can also be part of the strategy – bring in people with diverse backgrounds (e.g., someone with a sales or product development stint who can bring a new perspective to procurement). Encourage continuous learning so the team stays up-to-date on industry trends, digital tools, and best practices in strategic sourcing. Remember that to be a revenue driver, procurement staff must understand the business context deeply, so consider rotations or job-shadowing with commercial teams to build that understanding.
  9. Leverage Technology for Insight and Efficiency: Invest in modern procurement tools that provide better visibility and analytics. This could be spend analysis software, supplier relationship management systems, or AI-driven forecasting tools. The aim is twofold: gain insights that can lead to revenue opportunities (as discussed earlier), and streamline routine work to free your team for strategic tasks. For example, an AI tool that automatically analyses your spend and flags contracts where a supplier’s new product might improve your offering can directly feed into revenue plans. Similarly, automating purchase order processing can save time that a category manager could use to meet with a business unit about next year’s growth plan. Many companies see double benefits from digital procurement – improving the bottom line and the top line at once.
  10. Consider Procurement’s Role in New Business Models: As a more advanced step, think creatively about how procurement might itself become a part of revenue generation. In some cases, companies have turned procurement into a service provider. For instance, a procurement division with a “profit-centred approach” began offering services to external customers, thereby creating a new revenue stream. While not applicable to every situation, this example shows the ultimate evolution: procurement not only supports internal revenue but can actually sell its expertise externally (e.g., group buying services, procurement consulting to partners or subsidiaries). Even if you don’t go that far, the exercise of thinking “could we monetise our procurement capabilities?” is a healthy one – it pushes the team to world-class performance and a service mindset.

By implementing these steps, executives can systematically reshape procurement. It’s wise to remember that transformation won’t happen overnight. Start with quick wins – maybe form a cross-functional team for an upcoming product launch, or pilot a supplier innovation day with one division. Celebrate successes and broadcast them, as that will build momentum and buy-in. Over time, as each of these steps takes hold, you will see a noticeable shift: procurement conversations will be as much about revenue, market share, and innovation as they are about cost and compliance. That’s when you know procurement has become a true value driver for the organisation.

Conclusion: Procurement as a Growth Engine

Procurement’s evolution from a mere cost centre to a genuine revenue driver is not just a theoretical idea – it’s happening now in leading organisations, and it’s attainable for any company willing to embrace the change. We have seen that by aligning procurement with strategic goals, leveraging supplier innovation, ensuring quality and continuity, utilising data, and empowering the right talent, procurement can directly contribute to revenue growth and competitive advantage.

For executives, the message is clear: procurement is a lever for growth that you may not be fully utilising yet. If in the past procurement was something that stayed in the backroom, now it should be front and centre in your growth plans. It’s time to expect more from the function than just cost savings. As one procurement thought leader noted, we can change procurement’s storyline from being just a cost reducer to being a “tailwind” for the organisation – accelerating innovation, supporting sales, and enabling agility.

In practical terms, this shift means fostering closer collaboration between procurement and the revenue-generating parts of the business. It means rewarding procurement for creativity and value, not just thrift. And it means investing in the capabilities (both human and technological) that allow procurement to operate strategically. The pay-off for doing so is significant. Companies that have mature, value-focused procurement functions tend to outperform in profitability and innovation. They also handle market disruptions better, turning challenges into opportunities – for example, by being first to secure supply in a shortage (and thus continuing to serve customers when competitors cannot).

One could argue that in today’s business climate, with supply chain challenges and rapid innovation cycles, procurement’s strategic importance has never been higher. In the past few years, events have underscored how critical procurement and supply management are to keeping businesses running and customers satisfied. The next step is to harness that importance not just to survive, but to thrive – to use procurement as a source of innovation and revenue growth.

As you move forward, remember that culture change is a big part of this. Encourage your procurement team to be curious, to engage with suppliers beyond the RFQ, to speak up in product meetings with ideas, and to take ownership of outcomes, not just processes. Likewise, encourage your other executives to view procurement as their partner in achieving success. Over time, these attitudes will gel into a new way of operating.

In conclusion, turning procurement into a revenue driver is a transformative journey that touches strategy, process, and people. It requires leadership vision and cross-functional effort. But the reward is a procurement function that doesn’t just save money, it makes money – by fuelling innovation, securing advantage in the supply chain, and ultimately helping sell more of what your company offers. That is procurement as a growth engine. For an executive, unlocking that engine could be one of the most impactful moves you make for the future success of your organisation.

By implementing the ideas and steps discussed, you can reposition procurement from being seen as a necessary cost centre to being celebrated as a vital contributor to revenue and value. The next time someone asks, “What did procurement do for us lately?” you may well be able to answer: “They helped create our next multi-million-pound product line” – and that is a conversation well worth having.

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Sources:

  • McKinsey & Company – A new era for procurement: Value creation across the supply chain (2023)
  • eXceeding – From cost centres to value drivers (2023)
  • Procurement Leaders – The revenue generation (2024)
  • CPO Rising (Ardent Partners) – Harvesting Supplier Innovation (Kellogg’s case study)
  • EmpoweringCPO – Procurement as a Profit Center: Case Study

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