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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
Optimization of ROI in purchasing
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.
Application of ROI in purchasing
Calculating the ROI in purchasing makes it possible to measure the profitability of purchasing projects. By comparing investment costs and savings achieved, purchasing departments can make informed decisions and deploy resources effectively.
Calculation example
Example:
A company plans to achieve cost savings through supplier consolidation.
1st investment costs:
- Analysis and selection of suppliers: 60 hours
- Average hourly rate of the purchasing employee: € 50
- Total costs: 60 hours x € 50 = € 3,000
2. savings achieved:
- volume benefits through increased order volumes: discount of 5% on annual requirement
- annual requirement: € 200,000
- total savings: 5% of € 200,000 = € 10,000
Calculation of ROI:
ROI = (savings - investment costs) / investment costs x 100%
ROI = (€10,000 - €3,000) / €3,000 x 100% = 233%
Interpretation:
An ROI of 233% means that the investment in supplier consolidation has more than tripled. For every euro invested, an additional €2.33 was saved.
Evaluation and strategic findings
✓ Critical success factors
→ Precise cost allocation: exact recording of all direct and indirect costs for realistic ROI calculation
→ Systematic monitoring: continuous monitoring of savings and adjustment of measures
→ Stakeholder involvement: Early integration of all departments involved to ensure feasibility
⚠ Challenges and limitations
→ Long-term effects: Difficulty in evaluating sustainable savings over several periods
→ Qualitative factors: Complex evaluation of non-monetary benefits such as improved supplier relationships
→ Data availability: the challenge of obtaining reliable baseline data for comparative calculations
Future trends and implications:
"The evolution of ROI in procurement is moving towards holistic performance measurement"
→ Integration of ESG criteria in ROI calculations
→ AI-supported forecasting models for more precise ROI predictions
→ Automated ROI tracking systems for real-time monitoring
→ Extended ROI models with risk assessment components
◆ Strategic recommendations for action
→ Standardization: Development of uniform ROI calculation methods in purchasing
→ Digitalization: Implementation of automated tracking tools for ROI key figures
→ Training: Building ROI assessment expertise in the purchasing team
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.
