South African businesses have become exceptionally good at managing costs. Over the past few years, executives have had little choice. They have navigated load-shedding, inflation, rising fuel prices, supply-chain disruption, higher borrowing costs and constrained consumer spending. Most organisations have already scrutinised headcount, reduced discretionary expenditure and squeezed every possible efficiency from their operating budgets. Yet many are still overlooking one of the largest opportunities to improve profitability: procurement. For many organisations, procurement remains viewed primarily as an administrative function. It is responsible for negotiating prices, managing suppliers and ensuring products and services are delivered when required. Important, certainly, but rarely viewed as a strategic driver of business performance. That thinking is becoming increasingly outdated. According to Bain & Company, procured costs account for 25%-60% of a company’s total cost base, depending on the industry. McKinsey has found that procurement contributes more than 20% of the financial impact generated during major transformation programmes. Procurement is thus no longer simply about purchasing. It has become one of the most powerful levers available to organisations seeking to improve profitability, resilience and operational efficiency. The problem is that many businesses are still approaching procurement through the wrong lens. When organisations look for savings, the instinct is often to negotiate harder with suppliers or seek cheaper alternatives. While cost management remains important, an exclusive focus on price often obscures the bigger opportunity: reducing the total cost of managing noncore services and supplier ecosystems. A service provider may appear cheaper on paper but what happens when internal teams spend countless hours managing contracts, resolving service issues, processing invoices, co-ordinating vendors and monitoring performance? Those costs rarely appear as a line item in a financial report, yet they consume time, productivity and resources daily. The true cost of a supplier relationship is not simply what appears on an invoice. It is the cost of managing that relationship across the organisation. It becomes particularly apparent when businesses examine their supplier networks. Over time, many organisations accumulate dozens, and sometimes hundreds, of suppliers. Different regions negotiate their own contracts. Business units operate independently. Procurement decisions become fragmented. Reporting systems fail to provide a consolidated view of spend. The true cost of a supplier relationship is not simply what appears on an invoice. It is the cost of managing that relationship across the organisation. It becomes particularly apparent when businesses examine their supplier networks. The result is complexity. According to Deloitte, more than 65% of procurement leaders report limited visibility into supplier performance and spend management. That lack of visibility makes it difficult to identify inefficiencies, leverage purchasing power, or assess whether suppliers are delivering value relative to cost. Every unnecessary supplier relationship introduces additional administration, oversight and complexity, which creates cost, and the cost reduces competitiveness. Perhaps the most underestimated consequence of fragmented procurement is operational drag: the cumulative effect of small inefficiencies repeated thousands of times across an organisation. Duplicate approvals, multiple supplier onboarding processes, manual reporting, inconsistent service standards and poor spend visibility. Individually, these inefficiencies appear insignificant, yet collectively they can have a material impact on profitability. The challenge is that operational drag rarely appears as a single figure on a balance sheet. It is dispersed across departments, processes and supplier relationships and thus it often goes unnoticed until economic pressure forces organisations to examine their operations more closely. That moment has arrived. As businesses prepare budgets and strategies for the second half of the year, the conversation should shift from cost containment to value creation. The organisations that will outperform over the next decade will not necessarily be those that spend the least. They will be those that extract the greatest value from every rand they spend. In a low-growth economy, competitive advantage is found not only in what businesses sell but also in how efficiently they operate. Procurement is no longer a back-office function; it is becoming a boardroom issue. • Herbert is CFO at Sapphire.