Cost Savings

This is the amount the company saved through the process of sourcing the goods or services. Cost Savings can be difficult to define. In the simplest form, it can be defined by identifying the difference between what was previously paid or expected costs for a good or service. For example, in 2010 Item A cost the company $19 each. After bidding the product through a competitive sourcing process, the company now pays $14 each. That is a cost savings of $5. More complicated formulas may factor in total costs, or soft costs. This resource in the SIG Resource Center provides an overview of cost savings calculation methods: http://www.sig.org/src.php?id=6913

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