Cost Avoidance

Cost avoidance is a reduction in cost resulting in a spend that is lower than would otherwise have been if the cost avoidance exercise had not been undertaken. For example, if we currently pay $100/unit and consume 10,000 units a year, the total spend is $1,000,000 per annum. If the supplier applies for a 10% price increase, which we negotiate down to 5%, the total spend is more than last year by $50,000. But without the negotiation, the increase in spend would have been $100,000. We have avoided $50,000 in cost, even though actual spend has increased by the same amount. See also Savings.

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Discover the world’s largest Glossary of Procurement terms

With over 800 Procurement specific terms (and growing) you will find everything you need to know or thought you knew about the Procurement function. Our aim is to provide you with a comprehensive list collated from the Comprara Groups hub of training and consulting source materials.The Procurement Glossary has been compiled by industry expert Paul Rogers.