I hope that you have enjoyed the article Calculating Cost Savings In Multiple Years.

Like many other cost savings topics, what I’ve shared is a best practice among large companies but certain to be disputed by some in the purchasing and supply management space. So let me add these pieces of advice:

1. If you report cost savings differently than the way described in the article and senior management accepts that – great! Don’t change a thing. The whole point of reporting in the manner described is to gain integrity with senior management.
2. If you negotiate a fixed price throughout the multi-year contract, you may not be able to “officially” claim cost savings in all years BUT you can still communicate your impact verbally. Something like “If we hadn’t negotiated a reduction in price, our cost over the next three years would have been $300,000 higher.” It may not be official, but it doesn’t hurt to show your true impact.

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Recommended Reading

• Contract Review Checklist
• Contract Termination Letter
• Eliminating the Pain Out of Contract Management
• Is Contract Management a Critical Process?

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