Have You Nailed Your Top Procurement KPIs?
What are your top Procurement KPIs?
For me the strategic goals of an organisation's "end-to-end" Spend Control efforts (Procurement, Purchasing and Payables) are, of course, to maximise savings and value, minimise risk, and minimise process cost. Whilst Procurement may not own all of these processes, they are central to making things happen.
If you agree with my point of view (and currently have writer's block as you consider your top Procurement KPIs), then why not check out my top 6 savings areas below. These are the key elements best-in-class organisations focus on when they put in place a Spend Control framework to increase their levels of ‘spend under management’.
Procurement KPIs will of course be linked to the organisation's strategic objectives and may target some of these areas:
- Savings from Reduced Cost of Purchased Goods & Services: Avoidance of unnecessary purchases, savings from lower prices, reduced freight/delivery costs due to order consolidation, reduced late payment fees, increased capture of early payment discounts, reduced payment of duplicate and improper invoices.
- Savings from Increased Procurement Leverage: Increased savings from greater capacity for savings creation, increased savings from more and higher volume discount agreements, increased savings from lower process due to improved supplier relationships, and reduced cost of unwanted contract renewals.
- Savings from Process Efficiency: Reduced cost of PO handling, reduced cost of invoice capture in AP and other departments, reduced cost of invoice processing, reduced cost of administrative support in AP and Procurement, reduced audit costs, and reduced organisation-wide purchasing process costs.
- Savings from Mitigated Risk: Reduced costs of problems caused by supplier non-performance, and reduced cost of liabilities caused by supplier non-compliance.
- Strategic Benefits: Increased financial control, increased spend visibility, increased contract commitment visibility, increased transparency of the procurement process, increased organisational responsiveness, increased workforce morale.
- Considerations for Multi-Unit Organisations: Ability to effectively take a centre-led approach to procurement, ability to leverage full buying power, and ability to share and consistently leverage best practices.
I’m sure there are more. But this is a good starting position to get those creative juices flowing! It would be great to hear your views on what you believe are the top Procurement KPIs.
If you want to learn more about end-to-end eProcurement, benchmarking and top KPIs then register for our free seminar. We will explain why it is important to take an “end-to-end” view to eProcurement and the business case for achieving best practice status. It will include insight from Analysts and some measurable ROI of cost savings and process efficiency gains.