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ROI in purchasing: definition & important aspects for purchasing specialists
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ROI in a nutshell:
Return on investment (ROI) is a key figure that expresses the percentage ratio between the capital invested and the profit generated. In purchasing, ROI serves as an important decision-making criterion for evaluating investments and projects, for example when implementing new procurement systems or supplier development programs.
Example: A company invests €100,000 in a new e-procurement system that saves process costs of €40,000 in the first year and reduces material costs by €80,000, which corresponds to an ROI of 20% [(€120,000 - €100,000) / €100,000 × 100].
Contents
What is ROI in purchasing?
The return on investment (ROI) in purchasing is a key figure that measures the relationship between the resources invested in the procurement process and the resulting financial added value. It is used to evaluate the efficiency and effectiveness of purchasing activities. A positive ROI shows that the investments in purchasing lead to cost savings or increases in value that exceed the initial expenditure.
Core elements of ROI in purchasing
Importance of ROI in purchasing
Analyzing the ROI in procurement is crucial for assessing how effectively procurement strategies contribute to the company's value creation. A high ROI in procurement indicates that investments in this area lead to significant cost savings and competitive advantages. This helps decision-makers to deploy resources in a targeted manner and position procurement as a strategic partner within the company.
ROI in purchasing: From traditional cost control to strategic value management
ROI in procurement has evolved from a pure metric for measuring cost savings to a comprehensive tool that reflects the overall value contribution of procurement to a company's success. In today's business world, it is essential to go beyond pure price negotiations and build strategic partnerships. This shift from a traditional to a modern approach enables companies to achieve sustainable competitive advantages and meet increasing market demands.
Old: Traditional cost control
Traditional approach: In the traditional purchasing function, the focus was mainly on reducing direct procurement costs. Buyers often used simple tools such as spreadsheets to compare quotes and select the cheapest supplier. Negotiations focused on discounts and rebates without considering the long-term impact on quality and delivery reliability. This approach often led to short-sighted decisions, a lack of innovation and potential risks in the supply chain. In addition, hidden costs, such as higher maintenance costs due to inferior materials, were not sufficiently taken into account.
New: Strategic Value Management
Strategic Value Management: Modern procurement implements the concept of Strategic Value Management in order to maximize ROI comprehensively. Purchasing is seen as a strategic partner that actively contributes to value creation. With the help of advanced technologies such as big data analytics and AI, purchasing data is analyzed in real time in order to identify trends and make informed decisions. The focus is on innovation-promoting collaboration with suppliers, risk management and sustainability. This holistic approach not only reduces costs, but also improves quality, exploits market opportunities and increases operational efficiencies.
Practical example: Mechanical engineering industry
A leading engineering group introduced Strategic Value Management in its purchasing department. Through the use of an integrated procurement system and collaborative platforms, the company was able to supplier relationships relationships could be strategically expanded. Within one year, procurement costs were reduced by 12%. At the same time, delivery punctuality increased by 30% and product quality improved measurably. Through joint development projects with key suppliers, innovative products were brought to market faster, which increased sales by 8%. The ROI in purchasing increased by 25% overall, underlining the significant value contribution to the company's success.
Conclusion on supplier evaluation and ROI in purchasing
ROI in purchasing is an indispensable tool for evaluating and managing procurement activities. The systematic analysis of investment costs and savings achieved not only enables transparent performance measurement, but also supports the strategic orientation of the purchasing department. By continuously monitoring the ROI, companies can optimize their purchasing processes and ensure sustainable value creation. The balance between quantitative key figures and qualitative factors is particularly important in order to ensure a holistic assessment of purchasing performance.
