Educational Procurement Journal - March 2008 - (Page 13) Calculating Total Sourcing Savings The following three contracts were renegotiated during the fiscal year beginning on July 1 and ending on June 30. You are asked to provide data on the total savings achieved for this period: Calculating Procurement’s Value – Contributors to this article: is the associate director of Purchasing at Princeton University. is the director of Purchasing Services for Yale University. Jim Hine is executive director of Campus Procurement and Business Contracts at the University of California, San Francisco. Judy Smith is the director of Procurement Services for the University of Michigan. , is the executive director of Purchasing and Business Services for Arizona State University. Kevin Lyons, Ph.D., is the director of Procurement at Rutgers, The State University of New Jersey and is a research professor in Supply Chain Environmental Management. is a strategic sourcing analyst in the Business Intelligence Unit of Strategic Procurement at the University of Illinois. Contract A Contract B Contract C Aug 1 – Dec 3 Jan 1 – Dec 31 Jul 1 – Jun 30 (152) (181) (365) 10% 5% – 3% $100,000 $250,000 $125,000 Using the total savings calculation outlined in this article, the individual weightedaverage total savings are calculated for each contract and added together, which estimates the total savings achieved for the period: Contract A Contract B Contract C [(152/365) x $100,000 / (1 – .10) ] x .10 [(181/365) x $250,000 / (1 – .05) ] x .05 = = $4,627.09 $6,524.87 – $3,640.78 $7,511.18 [(365/365) x $125,000 / (1 + .03) ] x -.03 = Total Savings for Period Again, additional in-depth information including specific case studies will be shared by members of NAEP’s Ad-Hoc Cost Savings Committee during an in-depth presentation at this year’s 87th NAEP Annual Meeting in Austin, Texas, in April. The complete article will be published as the first NAEP monograph and made available in Austin and on the NAEP Web site. www.naepnet.org EDUCATIONAL PROCUREMENT JOURNAL 13 http://www.novadesk.com http://www.novadesk.com http://www.naepnet.org
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