KPI Benchmarks : Cost Reduction as a Percentage of Managed Spend
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Cost Reduction as a Percentage of Managed Spend
Cost Reduction as a Percentage of Managed Spend measures the Procurement function’s ability to “reduce” costs through diligent negotiation and vendor management practices. Lack of attention to potential cost reduction savings may be indicative of poor procurement processes and vendor relationships, as well as sub-par procurement employee performance and training, all of which may increase potential 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.
The dollar amount saved through cost reduction divided by the total dollar amount of managed spend over the same period of time, as a percentage.
KPI Calculation Instructions Cost Reduction as a Percentage of Managed Spend?
KPI Formula :
Spend Under Management (SUM)
The amount of company spending (direct, indirect and service-related spending) that is managed by the Procurement Department divided by total company-wide spend over the same period of time,...
KPI Type : Quality
Formula : (Dollar Amount of Expenses Managed by Procurement / Total Company-Wide Expense) * 100
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