Cost Savings Estimates: Be Precise Or Be Prepared For Unemployment

I hope that you have enjoyed the PurchTips article "Savings Estimates: Your Reputation At Risk."

With the title of that article and the title of this blog post, you may be thinking that any discrepancy between your cost savings estimates and actual cost savings will be the kiss of death in your purchasing career. Maybe that is a little bit of an exaggeration. But, still, you can't be sloppy when presenting your savings estimates.

I've seen purchasing departments where the only savings reported was the savings estimated on the day that a contract was signed. In these departments, there was no follow up to confirm that the estimated amount of savings - or any savings, for that matter - has been achieved. Not coincidentally, these purchasing departments also happen to not get very much respect from the C-suite.

There is usually some variation between savings estimates and actual savings. Whether that be because a different quantity of goods or services was purchased, maverick buying occurred, or some other reason, it is important to track actual savings and know why there was variation. Having this intelligence can help you capture more and more savings with the more sourcing initiatives you conduct. It is key to continuous improvement.

Plus, you just may impress finance types who respect your attention to detail and understanding of the numbers. And that can't hurt in terms of job security.

To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
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