Procurement ROI (Return on Investment) measures the financial value generated by procurement activities in comparison to the cost of running the procurement function.

What it Measures ?

How much we save for every rupee spent on buying things.

Relevant StakeHolders 

CFOs, Procurement Heads

In-depth Use Case / Real-world Example

Imagine you're working in a manufacturing company that produces industrial generators. To build each generator, the company needs to procure various components like engines, wiring, metal housings, and electronic controllers from different suppliers. To manage all this, the company has a dedicated procurement team. They negotiate contracts, find reliable suppliers, manage purchase orders, and use digital tools (like INSIA) to monitor costs, quality, and delivery timelines. Now, all these procurement activities come at a cost—salaries, software subscriptions, vendor management tools, and training. But if the procurement team is doing a good job—say, securing better prices, reducing waste, avoiding delays, and choosing high-quality vendors—then they are saving the company money and driving value. Procurement ROI helps measure how much value the procurement team delivers for every rupee spent on running procurement operations. For example, suppose the company saved ₹40 lakhs over a year through smarter sourcing, fewer stockouts, and lower freight costs, while spending ₹8 lakhs to run the procurement department. The Procurement ROI would be: ROI = (₹40 lakhs / ₹8 lakhs) = 5 or 500%. This means the company gained ₹5 in value for every ₹1 it spent on procurement. A higher ROI means procurement is not just a cost center—it’s a strategic lever that helps improve profits, ensure timely production, and keep quality standards high.