Top Procurement KPIs
The strategic goals of an organisation's 'end-to-end' Spend Control efforts 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.
It is therefore important that Procurement KPIs are aligned to the organisation's strategic objectives. Below are what we consider the top KPIs for Procurement professionals to target when putting in place a Spend Control framework to increase levels of ‘spend under management’:
- Savings from Reduced Cost of Purchased Goods & Services: from 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, and reduced payment of duplicate and improper invoices.
- Savings from Increased Procurement Leverage: from 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: from 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: from reduced costs of problems caused by supplier non-performance, and reduced cost of liabilities caused by supplier non-compliance.
- Strategic Benefits: from increased financial control, increased spend visibility, increased contract commitment visibility, increased transparency of the procurement process, increased organisational responsiveness, and increased workforce morale.
- Considerations for Multi-Unit Organisations: the ability to effectively take a centre-led approach to procurement, to leverage full buying power, and to share and consistently leverage best practices.
I’m sure there are many more. But this is a good starting position to get those creative juices flowing!