Most procurement teams do not struggle with finding initiatives. They struggle with converting effort into measurable impact.
SRM is one of the few investments that does both: it reduces hard costs (spend leakage, audit costs, claims) and unlocks capacity (less manual onboarding, fewer follow-ups, faster escalations). Done right, SRM becomes the operating system for supplier performance, risk, and collaboration - especially in complex industries like manufacturing, food and beverage, energy, utilities, processing etc. And increasingly, it matters in services-heavy environments too, like law firms and insurance companies, where third-party onboarding, compliance, and vendor risk controls are under constant scrutiny.
So how do you build a credible SRM ROI case?
Start with the basics: a small set of defensible assumptions, a simple ROI model, and KPI tracking that finance can validate.
Our practical ROI model has three value levers that procurement can quantify quickly: spend savings, time savings, and audit efficiency.
A common assumption is that tail spend often represents 20% of your total procurement spend (BCG), and when looking at data from Kodiak Hub's customers - you can estimates savings of 3%-5% of your tail spend once an SRM suite improves supplier governance, preferred supplier usage, and visibility.
This is often where the fastest hard savings appear, because SRM makes it easier to:
Reduce maverick buying by steering stakeholders to qualified suppliers
Standardize supplier data so sourcing decisions are faster and more consistent
Identify supplier consolidation opportunities (without losing coverage)
Formula to calculate savings:
Total annual spend x 0.20 x (0.03-0.05) = annual tail spend savings
SRM ROI is not only about “doing things cheaper.” It is also about doing more with the same team.
From Kodiak Hub’s customer research we've seen that companies, before adopting SRM software, spend about 10-20 manual hours per supplier onboarding, and that 80% of those tasks can be automated through workflows, templates, and structured supplier intake.
If we also assume that the average salary of a full-time employee in procurement is €70 000 and that you spend 1920 actual working hours during a year (vacation and bank holidays excluded), we can translate that time into cost.
Formula:
Supplier onboardings per month x 12 x (10-20) x 80% x (€70 000 / 1920 hours) =
annual onboarding time savings
This matters across every target industry, but the “why” differs:
Manufacturing and automotive: supplier qualification speed affects capacity, launches, and changeovers
Pharma, chemicals, food and beverage: qualification speed affects compliance, audit readiness, and product risk
Law firms and insurance: vendor onboarding affects operational resilience, data privacy posture, and regulatory control evidence
Audits are unavoidable in many supply chains. But wasted audit time is avoidable.
Customers of Kodiak Hub have seen 20% savings on audit costs through better preparation, fewer repeat findings and faster evidence collection.
Our data suggests that a common range of cost per audit is between €2500 - €20 000.
Formula:
Number of audits per year x average cost per audit x 20% = annual audit savings
Savings made in a year = combined savings from the three buckets: Spend savings + Time savings + Audit efficiency
Yearly SRM investment = The license cost per year for SRM software
Formula:
ROI in % = (Savings made in a year/Yearly SRM investment) x 100
A common concern with procurement platforms is time-to-value. SRM suites should not require a heavy transformation project, rather it sits as a layer between your existing stacks like ERP's, S2P, P2P and similar.
We typically outline a 13-week plan (kickoff, data and configuration, launch and baseline, go-live and scale) with ROI baseline tracking and monthly reporting built into the rollout.
From a value perspective, these are some of the outcomes that can be expected:
Onboarding cycle times reduced by up to 50%
Spend leakage reduction of 6%-8% of total spend
50% of spend under performance management
45% more delivered with the same resources
Supplier quality improved by 20-30%
Those outcomes will vary by organization, but the pattern is consistent: SRM software creates ROI when it turns supplier information into actions, not reports.
If you are building the SRM case internally, keep it simple and finance-friendly:
Model the “obvious” ROI first: tail spend savings, onboarding time savings, audit savings.
Add one performance lever that matters most in your industry: claims reduction, quality improvement, or disruption avoidance.
Define 3-5 KPIs you will track monthly after go-live: onboarding cycle time, supplier data completeness, audit cycle time/cost, preferred supplier usage, corrective action closure rate.
Start with Phase 1 scope: top suppliers, highest risk categories, or the biggest onboarding bottleneck - and expand once value is proven.
If you need help to build your business case internally for adopting SRM software - check our business case hub with ready made material you can edit and tailor to your organizations use-case.
SRM ROI is not theoretical. When supplier performance and quality matter, the economics are usually straightforward: less leakage, less admin, better control, faster decisions. The only real question is whether you want to keep paying for the same problems in hidden ways, or fund a system that makes the value measurable.
Are you interested in knowing more about the cost of poor SRM and not doing anything about it? Check out our post about the cost of inaction.