Cost Avoidance

Cost avoidance involves strategic actions taken to prevent future costs, commonly referred to as “soft savings”. These are costs that cannot be directly measured like the “hard savings” reflected in financial statements. It encompasses efforts to preserve existing spending and mitigate potential price increases resulting from factors such as inflation, economic shifts, or the rising costs of products or services.

While cost avoidance may not manifest as immediate cost savings, it plays a crucial role in the overall value generated by procurement. Often considered a preventive measure, it is imperative to carefully track cost avoidance efforts to ensure tangible results and contribute to the long-term financial health of the organization.

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