Sometimes budget centers, such as a budget associated with a certain department, are referred to as "cost centers."  When a department is referred to as a "cost center," that's not necessarily a good thing.  What "cost center" means is that the associated department "costs" a company money and doesn't produce any revenue.  In contrast, a budget that produces revenue is called a "P&L," and a P&L is good especially if there's a lot of P and no L.  Basically, a cost center is the reverse—no P and a lot of L.

When companies look to cut costs during tough economic times, they typically look very closely at cost centers and not so much at P&Ls.  Cost centers that don't provide a whole lot of value get their budgets slashed (or the departments are eliminated entirely) when the economy goes South.  P&Ls tend to be luckier in that regard.

Guess what?  Your procurement department is a cost center!

Sure, you can argue that your procurement department directly impacts your company's bottom-line through cost savings, that your procurement department lowers operational and legal risk for your company (and therefore costs), that your procurement department extracts more value from vendors by managing performance, that your procurement department blah, blah, blah...

Regardless of all that, your procurement department is still a money-sucking cost center.

But it doesn't have to be that way...  Your procurement department can actually be a P&L!  You might have a lot more L than P, but at least you're not just draining money from company coffers.  So, you ask, how the heck can a procurement department "generate" revenue!?  Well, here are some examples...

Vendor Discount Programs.  Many companies have vendor discount programs for their employees, such as discounts for online retailers like florists, book companies, and rental car agencies.  As an employee perks program, most companies sign up with a boutique firm that offers a set of these types of discounts for "free!"  Why do you think these boutique firms are willing to do that?  Because they get a kick-back, that's why!  As procurement pros, you should cut out the middleman and set up discount deals yourself with online retailers.  Sometimes you won't be able to get actual cash, but you'll get something tangible which is just as good.  Last year, my employer—specifically, my "cost center"—received over $200K in cash, numerous free software licenses, and 6 laptops through our vendor discount program.

Reseller Points.  Most large IT resellers facilitate the receipt of manufacturer points based on volume spend.  As a result of the relationship I have with my reseller, my employer received over $10K in various items such as printers, scanners, and digital cameras.  Thanks HP!

Leveraging Travel Agencies.  Similar to reseller points, if your company's employees do a lot of travel, travel agencies can arrange reward programs with airlines and hotels.  As a consequence, I rarely have to pay for airfare for my staff to go to external training.  I estimate that this resulted in about $15K in airfare and hotel stays last year.

P-cards with Cash Rebates.  Just like personal credit cards with cash award programs, the same goes for p-cards.  You just have to bargain for it and then drive everyone in your company to use p-cards.  If I can pay for any of my company's procurements with a p-card, I do.  I've purchased hundreds of thousands of dollars in software licenses so I could bump up my p-card spend.  In 2008, my employer received over $125K in case rebates from our p-card provider.

Speaking at Procurement Conferences.  Most conferences or events will give free registration for speakers.  Some even pay travel expenses.  Needless to say, my staff are strongly encouraged to speak at any conferences or events they would like to attend during the year.  No speaking = lower likelihood of staff attendance.  Last year, my staff and I spoke at no less than 10 conferences or events that would have otherwise cost me $10K in registrations, airfare, hotels, and meals.  Yeah, free training!

Net-net.  So, if I sum all of the above up, my procurement department generated over $350,000 in "revenue" in 2008.  In 2009, I've projected about $400,000 due to an increased number of online retailers in the vendor discount program.  My boss is a generous guy, so, while some of my revenue does go back to my employer, he allows me to reinvest a good chunk of the revenue back into the procurement department to acquire the tools and resources needed to get our job done.

P.S.  Thanks to one of my staffers, Donna Jackson, Esq., for pointing this out as a potential blog article.