I hope that you have enjoyed the article “Cost Savings: From Potential To Actual.”

In my years in the field, I’ve definitely seen an evolution of purchasing-driven cost savings. Cost savings are often recorded when a contract is signed and, as such, are only estimates. The evolution has followed this path:

1. Purchasing department doesn’t achieve cost savings
2. Purchasing department implements a contract poised to produce cost savings, management is surprised, but nothing is formally recorded
3. Purchasing department implements a contract poised to produce cost savings and records cost savings, but definitions of cost savings are not formal or defensible
4. Purchasing department implements a contract poised to produce cost savings and tries to apply strict standards to the recording thereof
5. Purchasing department implements a contract poised to produce cost savings, applies strict standards to the recording thereof, and compares estimated cost savings with actual cost savings at the end of a period
6. Purchasing department implements a contract poised to produce cost savings, applies strict standards to the recording thereof, and tracks the actual vs. estimated cost savings often throughout the life of the contract
7. Purchasing department implements a contract poised to produce cost savings, applies strict standards to the recording thereof, tracks the actual vs. estimated cost savings often throughout the life of the contract, and takes all actions necessary to ensure that actual cost savings equal estimated cost savings.

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Recommended Reading

• Cost Savings Definitions
• Cost Savings Analysis
• Cost Savings Calculations
• Measuring Cost Savings
• Cost Savings Ratios
• Cost Savings Goal
• Cost Savings Potential
• Calculating Cost Savings
• Cost Savings Reports

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