Establish the right baseline
The baseline may be the previous contracted price, budget, standard cost or a verified quotation. Document it to prevent double counting or mixing price effects with volume changes.
Savings and cost avoidance
Actual savings reduce cost against an established baseline. Cost avoidance limits an expected increase. Both may be valuable but should be reported separately.
Example
When price falls from 100 to 94 at 20,000 units, full-year savings equal 120,000. If the price starts halfway through the year, approximately half is realised before one-time costs.
Track realised impact
Compare the calculation with actual orders, volumes, exchange rates and invoices. Deduct implementation costs and note effects from quality, freight, payment terms or specification changes.
Calculate your own scenario
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Procurement savings calculator