SAVINGS PLANNER EXCEL HOW TO

The vendor sends you a renewal contract which includes a 10% increase from the previous year. Let’s take an example: You are currently paying $10,000 for a BI tool yearly subscription. “Cost avoidance is a reduction in cost resulting in a spend that is lower than would otherwise have been if the cost avoidance exercise had not been undertaken.”Ĭost avoidance is also called “Soft savings” Procurement should be tracking both cost savings and cost avoidance to better understand the total value delivered by procurement.Īs per (The Chartered Institute of Procurement and Supply No discussion about cost savings is complete unless you differentiate between cost savings and cost avoidance.

Click here to schedule a demo and we will walk you through a proven cost control framework to reduce cost. Whether that is through increased purchasing efficiency or just cost avoidance. approval process), companies can easily reduce 2-3% of their cost. It is like car insurance, you only understand the value when you need it.ĭepending upon the industry, cost savings could be a major lever that senior management can use to drive higher EBITDA margins.īy implementing a simple cost control (i.e. I am not saying risk mitigation is not important, but most people only understand the value when the risk really occurs. It has a direct impact on the bottom line as compared to other metrics like risk mitigation. So no doubt, this is an obvious and tracked procurement performance indicator. Also, this is the primary mission of the procurement department in most companies. This is the most objective and easy way (if done right) of measuring procurement performance. There are multiple reasons procurement cost savings is the main focus of the department. If the stakeholders are engaged, procurement savings will follow. The key to procurement success is the ability for procurement to better stakeholder engagement. I would argue that a sole focus on procurement cost savings is not a good strategy in the long term. The results make sense because priorities are very dependent on the industry and the maturity of the procurement department.Īll CPO’s should focus on all the four areas mentioned below. 57% said that managing risk is their key KPI. There is a lot of evidence of procurement focusing on savings.Īs per the recent survey conducted by Deloitte, 79% of CPO’s (Chief Procurement Officer) indicated that procurement saving is their top priority.

Understandably, procurement professionals focus on this one main performance indicator. Procurement cost savings is the primary KPI (Key Performance Indicator) for any procurement department.

SAVINGS PLANNER EXCEL HOW TO

How to leverage your Spend to negotiate better pricing with your suppliers.Fundamentals of procurement cost savings.In this step by step process, we will cover: Then this cost savings strategy would help you achieve that. Want to reduce your expenses by 5-8% annually?ĭo you spend at least $5m annually with vendors?

Savings planner excel