The Procurement Glossary » Return on Investment (ROI)

Return on Investment (ROI)

Spend & Analytics

Also known as: ROI

Definition

A measure of the value gained from an investment relative to its cost, used to justify procurement initiatives and technology.

Explanation

ROI frames procurement spending decisions in business terms — for example, savings and efficiency from e-procurement versus its cost. A clear ROI case wins investment and sets expectations for the value a project must deliver.

Example

The e-procurement project's ROI case shows RM1.5m of annual savings against RM400,000 of cost.

Related terms

• Cost Savings — A reduction in the price or cost of a purchase compared with a baseline, delivered through sourcing or negotiation.
• Process Cost per Order — The internal administrative cost of processing a single purchase order, covering staff time, systems and overhead.
• Total Cost of Ownership (TCO) — The full lifetime cost of a purchase — not just the price, but delivery, installation, operation, maintenance, downtime and disposal.
• Business Case — A structured justification for a proposed decision or investment, weighing costs, benefits and risks.

Frequently Asked Questions

What is Return on Investment (ROI)?

A measure of the value gained from an investment relative to its cost, used to justify procurement initiatives and technology. ROI frames procurement spending decisions in business terms — for example, savings and efficiency from e-procurement versus its cost. A clear ROI case wins investment and sets expectations for the value a project must deliver.

Can you give an example of Return on Investment (ROI)?

The e-procurement project's ROI case shows RM1.5m of annual savings against RM400,000 of cost.

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