In this blog, we present ten KPIs and procurement examples that you should apply in your company.
Procurement savings are important, but no longer the primary goal. Procurement is a critical business process without which there is no income. Today, procurement is striving for progress and improvement like never before, and it is guided by new values. And it can do this with KPIs and measuring the right data!
When and why to set KPIs?
KPI = KEY PERFORMANCE INDICATOR
The role of KPIs is to optimize and regulate consumption, quality, time and costs. They help companies keep pace with their overall process goals, procurement strategies and business objectives.
The right time to set KPIs is when you want answers to questions like:
- What should be improved?
- How do we compare to other organizations?
- Are we making progress or regressing?
KPIs in procurement are not strictly predetermined! Each company defines them depending on the situation and the goals set.
How to select KPIs?
KPIs must be relevant to procurement goals and easy to track. Focus first on the areas you know you need to improve and the goals you need to achieve. For example, if employees are bypassing procurement and claiming the process is taking too long, adjust acceptable SLAs and track implementation data. Pay particular attention to the overall goals at the enterprise level and align your procurement goals with them. For example, if the overall goal is to expand into new markets, procurement will support this by finding new suppliers, for example (KPI is the number of new suppliers in each market).
These are the TOP 10 KPIs that every procurement must measure regularly!
- Number of suppliers
Dependence on a single supplier is a major risk for the entire company. Always build relationships with multiple suppliers, especially in procurement categories that are critical to the delivery of your products and services!
- Time from order to delivery
Time is money! Track how long the time intervals are between sending the order and delivery.
- Delivery period
Meeting delivery deadlines and the availability of products and services is one of the most important KPIs in procurement!
- Evaluation of suppliers
Analysis of supplier quality and availability is essential for evaluating current and future supplier relationships and their ability to respond to demand. This is a procurement KPI that is critical to determining the quality of the final product, as it measures the percentage of products received from suppliers that do not meet compliance specifications and quality requirements.
- Inventory safety
Inventory safety is the most important KPI today. Disrupted supply chains, geopolitical unrest, and weather events such as drought all lead to shortages of raw materials.
- Costs under procurement management vs. costs outside procurement (maverick spend)
Only when you have all costs under control are you ready for other KPIs, such as monitoring savings, supplier performance and risk.
- Quality management of products and services
Quality is the most important thing, because it affects the final product of your company.
- Management of contracts
A prerequisite for discounts on contract renewals is a good knowledge of the implementation of the existing contract. Cost monitoring and optimization includes strategic spend management. This relates to the tariffs set with suppliers and consumption in line with the contract.
- ROI
Determine the return on investment!
- Customer satisfaction
This KPI refers to the satisfaction of all participants in the procurement process: suppliers, buyers, employees and partners.
How can you measure KPIs?
Data transparency and monitoring are basic prerequisites for achieving goals. Yet, most procurement organizations do not have appropriate tools or use outdated ERP systems that cannot capture and monitor the required data.
With Ensolva, companies gain access to a tool that manages procurement processes throughout the entire lifecycle – from requisition to purchase order to contract. The cloud solution provides instant access to all procurement data, and monitoring procurement KPIs has never been easier with a tool that collects, stores and analyzes all the necessary information.
Try the Ensolva solution and see how we can help you improve the efficiency of your procurement process!
In the next blog we will bring you everything about procurement analytics and data.
