How To Use Cost Savings Ratios & When
By Charles Dominick, SPSM, SPSM2, SPSM3
Can Cost Savings Ratios Make Reporting Easier?
Reporting cost savings is easiest when you negotiate a lower price and buy the same quantity of goods or services from one year to the next. Then, your cost savings is equal to the reduction in spend.
How do you report cost savings in these types of categories? "There's just no good way to do apples-to-apples based on a total spend," says Jim Nelles, Partner with Roland Berger Strategy Consultants. Instead, Nelles finds cost savings ratios to be a solution.
So rather than tracking the spend on every single pen or line item - especially when items are routinely discontinued - you can use cost savings ratios to demonstrate your contribution. Nelles contends that "it is by coming up with these interesting ratios and these different ways to demonstrate savings that people will start to believe what you are doing."
Do You Want a More Rewarding Procurement Career?
Are you tired of not getting enough opportunities, respect, and money out of your procurement career? Well, guess what? Nothing will change unless you take action towards becoming a world-class procurement professional.
Earning your SPSM® Certification is the action to take if you want to bring the most modern procurement practices into your organization and achieve your career potential. Download the SPSM Certification Guide today to learn how to get started on your journey to a more rewarding procurement career!
Need Better Performance From Your Procurement Team?
Are you a procurement leader whose team isn't achieving the results you know are possible? Maybe it's not enough cost savings. Or frustrating performance from the supply base. Or dissatisfied internal customers.
You need a performance improvement plan that's easy to implement and quick to produce results. The NLPA can help.
Download our whitepaper "The Procurement Leader's Guide To A More Successful Team." You'll learn the 7 steps for transforming your staff into a results-producing, world-class procurement team.
Are You Getting The Most Out of Your NLPA Membership?
Members of the NLPA get more than just articles like this by email. As a member, you also get access to:
If you haven't been taking advantage of these benefits, why not log in and start now?
Copyright 2010. This article is the property of Next Level Purchasing and may not be copied or republished in any form without the express written consent of Next Level Purchasing.
Click here to request republishing permission.