What is Cost Avoidance in Procurement?

Cost avoidance is the preservation of existing spending to prevent price increases due to inflation, economics or the rising costs of products or services. An example of cost avoidance is when a company purchases an extended equipment warranty to limit maintenance costs or out-of-pocket expenses.

Although cost avoidance doesn’t have an immediate impact on cost savings, it is a critical component of the overall value generated by procurement and must be carefully tracked to ensure results.

Learn more about GEP’s procurement savings tracking software platform.

Related Terms

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