Procurement cost savings refer to the savings that are realized by a company due to its more efficient and effective management of its purchases. This includes reduced costs for materials, services, labor, and time. To measure any cost savings, it’s important to consider both costs of goods purchased and costs related to purchasing activities. The former includes item-level costs such as raw material costs, energy costs, and transportation costs. Meanwhile, the latter include overhead, processing fees, and transaction costs. Accurately measuring procurement cost savings requires a comprehensive analysis of current spending and enhanced best practices. When done properly, this exercise allows for more timely and accurate budgeting, and informs strategic decisions on how to reduce future expenses.