Is Procurement a Cost center or Profit center

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Following is a typical definition of cost center and profit center

A cost center is a subunit of a company that is responsible only for its costs. Example of cost centers are the production departments and the service departments within a factory and administrative departments such as IT and accounting.

A profit center is a subunit of a company that is responsible for revenues and costs. Often a division of a company is a profit center because it has control over its revenues, costs, and the resulting profit.

So the question which I always debate with, is whether Procurement should be considered a cost center or profit center. I strongly feel that the answer lies somewhere between the two. Let’s look at some of the functions of the department and where they tend to align themselves.

 

Let me know what you think about this subject.

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