Procurement Glossary
Target/actual comparison of prices: definition, methods, and application in Procurement
November 19, 2025
Target/actual price comparison is a key controlling tool in Procurement that systematically compares planned prices with actual prices. This analysis enables purchasing organizations to identify price deviations at an early stage and initiate appropriate control measures. Read on to find out what target/actual price comparison entails, which methods are used, and how you can successfully implement price controlling.
Key Facts
- Systematic comparison of planned and actual purchase prices
- Enables early detection of price deviations and budget overruns
- Basis for data-driven decisions in price negotiations and supplier management
- Supports continuous improvement of purchasing strategy through deviation analysis
- An integral part of strategic purchasing controlling and cost management
Contents
Definition: Target/actual price comparison – explained in simple terms
The target/actual price comparison is a fundamental controlling method that systematically compares planned prices with actual purchase prices.
Basics and core aspects
The target/actual comparison is based on a comparison of target prices (planned, budgeted, or target prices) with actual prices (prices actually paid). This analysis is typically carried out at various levels:
- Item level for specific materials or services
- Supplier level for evaluating price performance
- Category or product group level for strategic analyses
- Overall purchasing level for higher-level budget control
Target/actual comparison vs. other analysis methods
In contrast to cost driver analysis, the target/actual comparison focuses exclusively on price deviations. While should costing determines theoretical cost structures, the target/actual comparison works with concrete plan values and real transaction data.
Importance in strategic Procurement
As a core component of purchasing controlling, the target/actual comparison enables continuous monitoring of price performance. It forms the basis for savings tracking and supports the strategic orientation of the procurement organization.
Methods and procedures
The systematic implementation of target/actual comparisons requires structured methods and clear processes for data collection and evaluation.
Data acquisition and system integration
Successful target/actual comparisons are based on high-quality data from various sources. ERP systems provide actual prices from orders and invoices, while planned prices come from budgeting processes or framework agreements. Integrating different data sources requires standardized article master data and uniform classifications.
Deviation analysis and categorization
Price deviations are systematically categorized and evaluated:
- Quantity-related deviations due to changes in order volumes
- Market-related deviations due to fluctuations in raw material prices
- Negotiation-related deviations due to supplier negotiations
- Process-related deviations due to operational inefficiencies
Reporting and control measures
Regular reports visualize deviations and their development over time. Cost center reporting enables detailed allocation of price deviations to areas of responsibility and supports the derivation of targeted corrective measures.
Tacto Intelligence
Combines deep procurement knowledge with the most powerful AI agents for strong Procurement.
Key figures for controlling
Effective key performance indicators enable precise measurement and control of price performance in Procurement.
Basic deviation indicators
The absolute price variance (actual price minus target price) and relative price variance (percentage variance) form the basis of the analysis. Cumulative variances over defined periods reveal trends and structural developments. These key figures are typically aggregated at the item, supplier, and category levels.
Performance indicators
The ratio of positive to negative deviations indicates the quality of price planning and negotiation performance:
- Planning accuracy: Percentage of deviations below 5%
- Savings rate: Proportion of purchases with negative price deviations
- Volatility index: Standard deviation of price deviations
Strategic performance indicators
The development of the average price deviation over time shows the effectiveness of optimization measures. ROI calculations evaluate the value contribution of price negotiations and supplier changes. Correlation analyses between price deviations and external factors support strategic planning.
Risks, dependencies and countermeasures
The implementation and use of target/actual comparisons involves various risks, which can be minimized by taking appropriate measures.
Data quality and system dependencies
Incomplete or incorrect data leads to false conclusions and suboptimal decisions. System failures or interface problems can compromise the timeliness of analyses. Regular data validation and redundant data sources significantly reduce these risks.
Misinterpretation of deviations
Superficial analyses can lead to hasty conclusions:
- Market-driven price fluctuations are interpreted as negotiation errors.
- One-time special effects are assessed as structural problems
- Quality differences are not taken into account in price comparisons.
Organizational challenges
A lack of acceptance among stakeholders can compromise the effectiveness of target/actual comparisons. Unclear responsibilities for deviations lead to ineffective corrective measures. A clear controlling structure and regular training create the necessary transparency and competence.
.avif)
Practical example
An automotive supplier implements a systematic target/actual comparison for steel procurement. The monthly analysis shows an average positive deviation of 8% from the budgeted prices. Through detailed root cause analysis, the team identifies market-driven raw material price increases as the main driver. In response, framework agreements with price escalation clauses are implemented and market indices are added to the budget planning. After six months, the average deviation is reduced to 3%, while planning accuracy increases significantly.
- Systematic data collection from ERP and market databases
- Categorization of causes of deviation according to internal and external factors
- Implementation of automated alerts for critical deviations
Trends and developments relating to target/actual comparisons Price
Modern technologies and changing market conditions are shaping the further development of price comparison analyses in Procurement.
Digitalization and AI integration
Artificial intelligence is revolutionizing price analysis through automated deviation detection and predictive analytics. Machine learning algorithms identify patterns in price deviations and predict future developments. Real-time dashboards enable continuous monitoring of critical price indicators and automated alerting systems.
Advanced analysis dimensions
Modern target/actual comparisons integrate additional cost dimensions such as total cost of ownership and take sustainability factors into account. The analysis of price index linkages is becoming increasingly important for volatile commodity markets.
Agile price control
Shorter planning cycles and dynamic market conditions require more flexible approaches. Rolling forecasts are replacing static annual budgets, while continuous price negotiations based on current market data are becoming increasingly relevant.
Conclusion
The target/actual price comparison forms the basis for data-driven price management in Procurement. Through systematic analysis of price deviations, it enables early control measures and continuous optimization of procurement performance. Modern technologies significantly expand the possibilities for analysis, while integration into comprehensive controlling systems maximizes strategic value contribution. Successful implementation requires high-quality data, clear processes, and organizational anchoring of findings in decision-making processes.
FAQ
What is the difference between target/actual comparison and budget controlling?
The target/actual comparison focuses specifically on price deviations for individual items or suppliers, while budget controlling looks at overall cost development at an aggregate level. Both instruments complement each other within the framework of comprehensive purchasing controlling.
How often should target/actual comparisons be carried out?
The frequency depends on the volatility of the goods procured. Weekly or monthly analyses are recommended for critical raw materials, while quarterly comparisons are sufficient for stable product groups. Automated systems enable continuous monitoring with defined thresholds.
Which target prices are suitable as a reference?
Budgeted prices from annual planning, framework agreement prices, market prices from benchmarking studies, or should-cost calculations can serve as target values. The choice depends on the objective of the analysis and the availability of reliable reference data.
How are price differences due to quality differences assessed?
Quality differences require prices to be normalized to comparable specifications. Total cost of ownership considerations take into account the follow-up costs of different quality levels. Separate categories for different quality levels enable meaningful comparisons.
.png)
.png)
.png)
