Procurement Cost Savings & ROI Calculator
Procurement Savings Calculator
How the Procurement Cost Savings & ROI Calculator Works
Formula:
Cost Savings = (Previous Cost − Negotiated Cost) × Annual Volume
ROI (%) = (Cost Savings ÷ Implementation Cost) × 100
How to use: Enter your previous cost per unit, the negotiated cost per unit, your annual purchase volume, and any implementation cost for the savings initiative. Adjust the negotiation impact slider to simulate different cost reductions. The calculator will show your total cost savings and ROI, and visualize the results.
- Previous Cost per Unit ($): The price you paid before negotiation.
- Negotiated Cost per Unit ($): The new price after negotiation or supplier change.
- Annual Volume (units): The number of units you expect to purchase in a year.
- Implementation Cost ($): Any cost incurred to achieve the savings (e.g., switching suppliers, process changes).
- Negotiation Impact (%): The percent reduction achieved through negotiation, applied to the previous cost.
This calculator helps procurement teams estimate the financial impact of supplier negotiations and cost-saving initiatives, and assess the return on investment (ROI) for procurement projects.
Frequently Asked Questions
Subtract the negotiated cost per unit from the previous cost per unit, then multiply by your annual volume. The calculator does this automatically for you.
A good ROI depends on your business goals, but typically an ROI above 100% means your savings are greater than your implementation costs.
Implementation cost includes any expenses required to achieve savings, such as switching suppliers, process changes, or technology investments.
Negotiate better prices, increase order volumes, optimize supplier selection, and reduce implementation costs.
Yes, you can use it for both products and services—just enter the relevant cost and volume figures.
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