I hope that you have enjoyed the article “Calculating Cost Savings In Multiple Years.”
Like many other cost savings topics, what I’ve shared is best practice among large companies but certain to be disputed by some in the purchasing and supply management space. So let me add these pieces of advice:
1. If you report cost savings differently than the way described in the article and senior management accepts that – great! Don’t change a thing. The whole point of reporting in the manner described is to gain integrity with senior management.
2. If you negotiate a fixed price throughout the multi-year contract, you may not be able to “officially” claim cost savings in all years BUT you can still communicate your impact verbally. Something like “If we hadn’t negotiated a reduction in price, our cost over the next three years would have been $300,000 higher.” It may not be official, but it doesn’t hurt to show your true impact.
To Your Career,
Charles Dominick, SPSM
President and Chief Procurement Officer
Next Level Purchasing, Inc.
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