Healthy ROI is critical — we all know this. What you might not know is that there are some really effective ways to handle these reinvestments that fly under the radar. For instance, the first reaction is often to devote funds to top-line-contributing departments, like sales. This tactic certainly makes sense when you’re looking at the big picture of revenue and customer count. However, sales platforms are not the only tools that can impact ROI in a big way. You may be overlooking the other departments within your business that also drive savings that go directly to your bottom line.
There are three key departments that can enhance your competitive edge via higher ROI from the tools and processes that they put in place. These departments are procurement, IT, and marketing. Here’s how:
As a manufacturer, sourcing is a major player in your day-to-day workflow. While it’s easy to measure the direct cost of sourced materials, it can be difficult to measure ROI beyond traditional savings for procurement. However, there are a few other areas that you should be looking at, namely, risk avoidance, innovative contributions, and efficiency.
When discussing procurement risk avoidance in a recent Harvard Business Review (HBR) report, a sourcing leader points out, “Legal people will tell you: risk is not just about the dollar amounts involved. In certain complicated areas of spend, we’re actually reviewing contracts for partnerships that have zero dollars in value assigned to them. A strategic sourcing organization should support risk mitigation on any agreement of consequence that the company is entering into, because at the end of the day, the company is committing to certain liabilities by entering into that agreement. The legal department and the sourcing function are two of the last gate checks for these types of risks.” The HBR report also emphasizes the value of implementing a strategic sourcing solution that streamlines processes, stating that increased business efficiency from strategic sourcing can drive up to 400 percent ROI.
Many of today’s strategic sourcing platforms give internal stakeholders the ability to quickly compare prices and quality of materials, ensuring that you get the best quality supplies at the lowest cost. Be careful to not relegate a strategic sourcing platform to merely lowering vendor costs. It also increases productivity, enhances collaboration, and manages supplier contracts to minimize risk, hitting key areas that help drive long-term ROI and keep the business competitive.
Technology is a necessary component of manufacturing businesses, whether it be the implementation of customer ordering platforms or investments in new technology for an assembly line. Whatever the tool, it is important to consider the long-term ROI. It is easy to jump into a technology investment when it fixes an immediate problem or quickly gives you a leg up on the competition, but it might become irrelevant or lead to unplanned costs down the road if not properly researched. This means that your investment could end up backfiring by making a bigger dent in the budget than originally estimated.
Before every technology decision, create a process to fully examine your options. Your IT department should evaluate the costs (both up-front and future) of creating a new technology in-house, outsourcing development, or adopting an existing technology. Developing an ROI analysis for major tech decisions will protect your bottom line and keep a steady competitive advantage — and IT can be the one to lead you there.
It can be a challenge to present measurable results from marketing efforts, but it is certainly not impossible. When your marketing department teams up with your finance and accounting teams, they can work together to create formulas – such as money spent versus audience reach – to measure marketing tactics. Once these measurements are put in place, your marketing team can easily determine what tactics work, where to add marketing dollars, and what to stop investing in — which in turn ensures that every marketing dollar spent is giving your company measurable returns.
Your manufacturing business’s marketing department may also be responsible for media relations for the company, whether that be through in-house outreach or the oversight of a third-party PR agency. Regardless of the depth of your marketing department’s involvement in the media relations process, they must still develop measurable goals when it comes to generating positive relationships and media mentions for your brand in order to measure the ROI for these efforts. One way of doing this is to determine whether or not the brand awareness that these media relations activities are generating is actually assisting the sales department in any way, whether that be through collateral for sales conversations or direct leads. Once you find a way to measure the effectiveness of your media mentions, you can better determine what types of coverage and relationships deliver the best ROI and then align efforts accordingly.
The key to creating a competitive edge is looking beyond the sales team and finding hidden ways to drive increased ROI in each and every department. Increasing your company’s ROI is not just about making more sales. Dig deeper into your investments in procurement, IT, and marketing to make sure that every penny spent gives you something in return. Whether that takes the form of dollar savings or increased productivity, each department must work together as a well-oiled machine to increase ROI for the entire company.
Alex Yakubovich is CEO of Scout RFP.