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Vendor Management Guide
How to measure ROI in Procurement?
The return on investment (ROI) of a procurement process can be measured accurately by tracking the costs associated with the procurement activities and the net financial benefits they provide.
However, identifying the financial benefits of a procurement is not always a straightforward process, as it is both tangible (direct cost savings) and intangible (risk mitigation, supplier relationships) in nature.
Procurement ROI =[Total Procurement Costs / Net Benefits (Savings + Value)] *100
This formula clearly shows the ROI of a procurement function by measuring its investments against the strategic contribution made by procurement to the business’ profitability.
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