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Old 11-30-2012, 05:18 PM
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We use "Cost Reduction" as the primary heading and then define cost savings, cost avoidance and productivity improvements. Below are the definitions.
Cost Savings:
* Savings resulting in a lower price compared to last price paid.
* Savings achieved by a change in materials, specifications, or scope of services resulting in a lower price or overall cost compared to historical price/cost information.
* Can be reported as a one-time savings or multiple years
Cost Avoidance:
* A cost reduction, reached through Procurement involvement, resulting in a lower price/cost than an initial proposal
* Avoiding a potential increase in price/cost by implementing a strategy to control, delay, or avoid potential increases with business clients and/or suppliers
Process / Productivity Improvement:
* A savings resulting from a reduction in internal resources, i.e. man/method/machine
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