Cost Savings: Tips For Recording Them
By Charles Dominick, SPSM, SPSM2, SPSM3
Are You Optimally Recording Your Cost Savings
One of the most important practices in demonstrating Purchasing's value to the organization is tracking and reporting
cost savings. When you achieve cost savings, there is important data you should log, such as:
Allow me to elaborate on some of these items...
Baseline Price. Cost savings is the difference between your current price and a higher price, called a baseline.
Type of Baseline or Type of Savings. Baselines may include last year's price, originally proposed price, cost to produce internally, etc. The baseline may determine whether management deems the impact an avoidance or cost savings and may only be interested in the latter.
Cost Savings. This field should be automatically calculated by multiplying the quantity by the difference between the baseline price and the current price.
Cost Center. Reporting your cost savings by cost center helps Purchasing demonstrate the positive impact it made on a specific department's budget.
Here are three more tips for recording cost savings:
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