Cost avoidance vs. Cost Reduction

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What is and is not considered savings is  always a topic of discussion between sourcing and finance. Usually there is a difference of opinion on what should be considered while reporting savings. Finance usually focus on savings which impacts current year budget and hence contribute to bottom line.

Sourcing on the other hand would like to consider all savings including cost avoidance,

Generally, an accepted norm is that only Cost reduction should be considered for reporting savings, This presentation talks about some key differences between cost avoidance and cost reduction.

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