eProcurement savings & ROI calculator
The calculator sets your process cost and your maverick buying against an investment.
All inputs and assumptions are yours. The pre-filled values are example values, not benchmarks.
Where do eProcurement savings come from?
eProcurement savings come from three sources: lower process cost per order, less maverick buying and agreed prices that reach every order through catalogs. The calculator below covers the first two with your own figures; the third depends on your negotiations and is not part of the model.
Process cost per order
Every order runs through requisition, approval, ordering, goods receipt and invoice. When requesters order from catalogs, approvals follow rules and the order goes to the ERP automatically, fewer of these steps are done by hand.
Maverick buying
Orders placed outside framework agreements and catalogs are usually bought at list price instead of the agreed price. If the catalog is the easiest way to order, more volume runs through your contracts.
Prices through catalogs
Catalogs carry the prices of your framework agreements, so requesters order at contract prices without looking them up. Volume bundled with fewer suppliers strengthens your position in the next negotiation.
Benchmarks with source
The Hackett Group reports that digital transformation can reduce the process costs of typical procurement organisations by 30 percent, and that technology enables world-class procurement organisations to reduce their cost per order by more than 70 percent.
The Hackett Group, press release of 21 August 2018
These figures describe procurement organisations in general and are not a forecast for your project. Enter your own reduction rates in the calculator.
Inputs and assumptions
Result
The result is recalculated with every change.
- Total savings per year
- –
- Payback
- –
Calculation path
| Item | Value | Origin |
|---|---|---|
| Process cost | ||
| Orders per monthYour input (example value) | 2,500 | Your input (example value) |
| Process cost per orderYour input (example value) | €85 | Your input (example value) |
| Reduction of process costYour assumption | – | Your assumption |
| Process cost savings per yearCalculated | – | Calculated |
| Maverick buying | ||
| Average order valueYour input (example value) | €850 | Your input (example value) |
| Maverick buying shareYour input (example value) | 25% | Your input (example value) |
| Maverick price premiumYour input (example value) | 12% | Your input (example value) |
| Additional cost from maverick buying per yearCalculated | €765,000 | Calculated |
| Reduction of maverick buyingYour assumption | – | Your assumption |
| Maverick buying savings per yearCalculated | – | Calculated |
| Total | ||
| Total savings per yearCalculated | – | Calculated |
| Investment in year oneYour assumption | – | Your assumption |
| Net result in year oneCalculated | – | Calculated |
| PaybackCalculated | – | Calculated |
The calculator is a calculation aid, not a quote and not a commitment. The result depends entirely on your inputs and assumptions.
How the calculator works
The model is kept simple so that your controlling team can verify it.
- Process cost savings per year
- Orders per month × 12 × process cost per order × reduction of process cost
- Additional cost from maverick buying per year
- Orders per month × 12 × average order value × maverick buying share × maverick price premium
- Maverick buying savings per year
- Additional cost from maverick buying × reduction of maverick buying
- Total savings per year
- Process cost savings + maverick buying savings
- Net result in year one
- Total savings per year − investment in year one
- Payback in months
- Investment in year one ÷ total savings per year × 12
- Ariba costs over 5 years
- Your annual Ariba costs × 5
What the model does not cover
- Running costs after year one
- The ramp-up of usage over time
- Effects from better terms or demand bundling
- Internal project effort, unless you include it in the investment
From assumption to cost framework
The investment in the calculator is your assumption. The figure for your project comes from a cost framework based on your modules, your integrations and your operating model.
Request a cost framework
Questions about eProcurement savings and ROI
eProcurement saves through lower process cost per order and less maverick buying, so the amount depends on your order volume, your current process cost and how consistently requesters use catalogs. As a benchmark, The Hackett Group reports up to 30 percent lower process costs for typical procurement organisations through digital transformation. The calculator above replaces the benchmark with your own figures.
Procurement ROI sets the yearly savings against the investment: process cost savings plus avoided maverick buying cost, minus the investment in year one. The calculator shows every step and the origin of each figure, so your controlling team can check it.
Payback in months is the investment in year one divided by the total yearly savings, multiplied by 12. The calculator assumes full usage from the first month, so the real payback comes later if adoption grows step by step.