Zero-Based Budgeting (ZBB)

Zero-Based Budgeting (ZBB) is a method of budgeting where all expenses must be justified for each new period, starting from a "zero base." Unlike traditional budgeting that uses previous budgets as a starting point, ZBB requires every function and expenditure to be analyzed for its needs and costs.

In procurement and supply chain management, ZBB helps:

• Question historical spending patterns
• Identify and eliminate unnecessary costs
• Allocate resources based on current needs rather than past trends
• Improve cost visibility and accountability
• Drive strategic sourcing decisions

Organizations implementing ZBB often use procurement analytics tools to gain deep visibility into spending categories, supplier performance, and cost drivers to make informed decisions about resource allocation.