How to measure cost savings in procurement

To accurately measure cost savings in procurement, stakeholders must track both the tangible and intangible benefits delivered by their procurement activities. With the help of spend analysis, they can compare current spend patterns against historical data and pre-negotiated contracts. When aligned with procurement KPIs, cost savings can demonstrate procurement’s direct impact on the organization’s bottom line.

Direct savings can be calculated from volume discounts, lower prices, and negotiated supplier terms. Indirect savings can be calculated by taking into account reduced administrative costs, process efficiency, and other intangible benefits. Procurement software can identify cost savings more accurately by assessing strategic sourcing activities and contracts.

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