Total annual cost takeout savings and cost avoidance savings on purchased goods and services as a percentage of purchases

This measure calculates the total annual cost takeout savings and cost avoidance savings as a percentage of all materials and services purchased. Cost takeout is defined as paying less for what was already being purchased, calculated as the difference between current and prior year spend for the same or similar recurring purchases. Cost avoidance is reducing future costs (intangible savings) typically achieved through actions such as negotiating lower rates for new goods and services to be purchased. This measure is part of a set of Process Efficiency measures that help companies in obtaining the greatest saving and performance by minimizing waste and optimizing resource consumption.

Benchmark Data

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Measure Category:
Process Efficiency
Measure ID:
109697
Total Sample Size:
1,616 All Companies
Performers:
25th Median 75th
- - -
Key Performance Indicator:
No
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Compute this Measure

Units for this measure are percent.

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((Total annual cost takeout savings obtained on purchased goods and services + Total annual cost avoidance savings obtained on purchased goods and services) / Value of all materials and services purchased) * 100.0

Key Terms

There are no key terms associated with this measure.
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Measure Scope

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Cross Industry (7.3.1)

  • 4.2.1 - Develop sourcing strategies (10277)
    • 4.2.1.1 - Develop procurement plan (10281)
    • 4.2.1.2 - Clarify purchasing requirements (10282)
    • 4.2.1.3 - Establish materials management contingency plans (10283)
    • 4.2.1.4 - Match needs to supply capabilities (10284)
    • 4.2.1.5 - Analyze organization’s spend profile (10285)
    • 4.2.1.6 - Seek opportunities to improve efficiency and value (10286)
    • 4.2.1.7 - Collaborate with suppliers to identify sourcing opportunities (10287)
  • 4.2.2 - Select suppliers and develop/maintain contracts (10278)
    • 4.2.2.1 - Select suppliers (10288)
    • 4.2.2.2 - Certify and validate suppliers (10289)
    • 4.2.2.3 - Negotiate and establish contracts (10290)
    • 4.2.2.4 - Manage contracts (10291)
  • 4.2.3 - Order materials and services (10279)
    • 4.2.3.1 - Process/Review requisitions (10292)
    • 4.2.3.2 - Approve requisitions (10293)
    • 4.2.3.3 - Solicit/Track vendor quotes (10294)
    • 4.2.3.4 - Create/Distribute purchase orders (10295)
    • 4.2.3.5 - Expedite orders and satisfy inquiries (10296)
    • 4.2.3.6 - Reconcile purchase orders (10297)
    • 4.2.3.7 - Research/Resolve order exceptions (10298)
  • 4.2.4 - Manage suppliers (10280)
    • 4.2.4.1 - Monitor/Manage supplier information (10299)
    • 4.2.4.2 - Prepare/Analyze procurement and vendor performance (10300)
    • 4.2.4.3 - Support inventory and production processes (10301)
    • 4.2.4.4 - Monitor quality of product delivered (10302)