For decades, savings targets have been the cornerstone KPI for procurement teams. Procurement consultancies were judged almost entirely on the money they saved, the deals they negotiated, and the immediate impact on the bottom line. But in today’s complex business environment, is focusing solely on cost reduction still the right approach? Let’s explore the arguments on both sides.
Yes: Savings remain a core KPI
There’s no denying that financial performance still matters. Procurement exists to protect and improve margins, and organisations rely on measurable outcomes to ensure their operations remain commercially viable. For CFOs and boards, savings are tangible, auditable, and can be quick to report on when done properly. A clear focus on cost reduction also incentivises procurement to negotiate effectively and drive efficiency across supply chains.
In short, without savings, procurement risks being seen as a cost centre rather than a strategic function that generates real, tangible value. A baseline of cost discipline remains essential for sustainable commercial performance.
No: Savings should not be the sole measure
However, an overemphasis on short-term savings can be counterproductive. Driving procurement solely on cost can damage long-term value. For example, pushing suppliers too hard on price can compromise quality, innovation, preferencing and service levels, ultimately eroding the benefits of what procurement should be delivering.
Modern organisations expect procurement teams to contribute far more than immediate savings. Procurement consultants are increasingly tasked with delivering value in areas such as supplier relationship management, innovation, ESG impact, and supply chain resilience. These benefits may not be immediately quantifiable in financial terms, but they are crucial for sustainable growth. Focusing exclusively on cost can also encourage a race-to-the-bottom mentality, undermining supplier partnerships and stifling innovation.
Striking the right balance
The challenge is finding the right balance between financial outcomes and strategic value. Savings should remain an important metric- after all, protecting margins is a critical part of procurement’s mandate. But KPIs should also reflect long-term objectives, including supplier collaboration, risk mitigation, sustainability, and innovation.
Many forward-thinking organisations are adopting balanced scorecards for procurement, combining cost savings with metrics around supplier performance, ESG compliance, and value creation. This approach ensures that procurement teams and procurement consultancies are recognised not only for what they save today but for the value they deliver tomorrow.
Procurement- more than just cost savings
While savings are still important, they should no longer be the only measure of procurement success. Procurement teams and procurement consultants need to demonstrate a broader contribution to organisational goals. By balancing short-term savings with long-term value creation, businesses can ensure procurement remains a strategic driver rather than a transactional function.