Yet, being able to calculate the value of a SMS is an important issue for the Procurement Departments. It serves:
Confined to a Total Cost of Ownership approach (TCO), the Procurements Departments have gradually adopted the Total Value of Ownership (TVO) concept to assess the ROI of purchases. TVO approach enables the inclusion of qualitative gains into a ROI calculation as well as financial gains that go beyond cost reductions.
Assessing ROI of SMS simply followed this trend and Procurement Departments now use the concept of TVO to estimate the net created value following the implementation of SMS.
The TVO of SMS can be calculated with the equation: value created / costs involved
However, the process becomes more complex when considering the definition of “costs involved” and “value created”!
“We must demonstrate the ROI of our Spend Management Solution on both a financial and a qualitative basis. There will always be benefits that we cannot financially assess, but anyway the ROI of the SMS must be a mix of quantitative and qualitative elements”states Sylvie Noel – CPO – Covéa
Trending in Procurement aimed to answer these questions and provides a clear vision of “how companies apply the concept of TVO to the purchase of Spend Management Solutions”.