Cost Avoidance as a Percentage of Managed Spend

Cost Avoidance as a Percentage of Managed Spend

KPI Details

Cost Avoidance as a Percentage of Managed Spend measures the Procurement function’s ability to “avoid” costs through diligent procurement practices. Lack of attention to potential cost avoidance savings may be indicative of sub-par procurement processes and vendor relationships as well as sub-par procurement employee performance and training, all of which may increase organizational opportunity costs related to missed cost savings (i.e., saved cash could have been allocated to another area to improve service, products, etc.) and make it more difficult for the company to fulfill its liabilities in a timely fashion. Companies need to implement measures to track cost avoidance as it does not show up in financial statements or budgets.

KPI Definition

The dollar amount saved through cost avoidance divided by the total dollar amount of managed spend over the same period of time, as a percentage.

KPI Calculation Instructions Cost Avoidance as a Percentage of Managed Spend?

KPI Formula :