Purchase Price Variance (PPV) in Procurement and Savings Strategy: Limitations and One Potential Use [PRO]
There are many reasons why purchase price variance (PPV) is not the best metric to track procurement performance. In last week’s Spend Matters PRO research brief, Why Purchase Price Variance (PPV) Should Be Banished From Procurement Measurements and KPIs, Jason Busch (Managing Director) and Pierre Mitchell (Chief Research Officer) gave 10 reasons why PPV can be misleading and how smart procurement organizations in the market have long since moved past it. These reasons include the fact that declining and rising cost variables outside of a buyer’s control can have a significant effect on individual part costs not reflected in the actual performance of a procurement manager and the fact that PPV fails to measure true lifecycle costs. In today’s Spend Matters PRO research brief, Jason and Pierre start by providing a summary of the first analysis and then explore a scenario where PPV may actually be a useful means of measurement, courtesy of Tungsten’s new network analytics capability.