Cost Reduction as a Percentage of Managed Spend

Cost Reduction as a Percentage of Managed Spend

KPI Details

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.

KPI Definition

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 :