Procurement: Material Price Variance (MPV)

Procurement: Material Price Variance (MPV)

Data & Calculation:

This is done by tracking the difference between standard purchase price and actual purchase price for each completed purchase order.

For each completed purchase order

  • Delta = Standard_Purchase_Price – Actual_Purchase_Price
  • MPV = Deta x Purchase Qty

For a period, say Month-To-Day (MTD) or Year-to-Day (YTD)

  • MPV (%) = MPV ($) / Total Purchase Expenses
  • MPV ($) = Sum of MPV

Note that the method used to calculating standard_Purchase_Price and frequency of update could be different by companies.  Another consideration is impacts of foreign exchange fluctuations on MPV, which can be done with MPV with benchmark exchange rate.

MPV is used to review supplier price performance.   This can be used to support purchase expenses analysis and sourcing strategies.

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