Download Exclusive Industry Benchmark Reports. This metric doesn’t make everyone’s list, but when used … Depending on their purpose, these procurement KPIs can be split into three major categories: ensure quality, improve delivery, and delivery savings. They are also crucial to ensure that procurement is sustainable and that purchasers are constantly looking for ways on how to improve procurement processes. This KPI covers the end-to-end ordering process which makes up the whole purchase order cycle. As a result, procurement leaders are constantly looking for ways to improve their procurement process and make it more sustainable. These KPIs enable the procurement department to control and optimize the quantity, quality, costs, timing and sourcing of purchasing processes. 0000001758 00000 n The first five procurement KPIs focus on financial measures. While cost savings are an obvious objective of procurement performance, it is not just restricted to that. xref The Ultimate Guide to Managing Remote Procurement Teams. In the days of pen and paper, the path traveled by a purchase order was … Supplier lead time = Delivery time (Goods and receipts delivery) – Order time (PO acceptance). Procurement KPI’s For Maximum Cost Savings NOTE: If the audio quality from your computer is poor, you can dial in to 1-513-241-0892 & use conference code 951074#. So it is important for organizations to monitor and improve, performance and health of procurement. And so, they track an array of metrics as KPIs. [Free Webinar] Join us to learn how digital procurement can help you measure KPI’s and impact your business bottomline. Supplier availability is a measure of a supplier’s ability to respond to emergency … Procurement KPI’s For Maximum Cost Savings Charles Dominick, SPSM, SPSM2 President & Founder, Next Level Purchasing Association. Procurement KPIs are measured across supply categories, buyer segments, and more. Return on Investment. How do we compare with other organizations? Emergency purchases are those unplanned orders which are acquired to prevent the shortage of products/services. The most important aspect of procurement KPIs are finding ways to actually implement them in transactions that does not fall under the traditional "time & material" model as most of the offerings in recent times have evolved to fixed-price model or one-stop pricing. trailer … This metric is best suited for internal analysis. Procurement Dashboard examples. This metric is measured with the ratio of emergency purchases to the total number of purchases over a fixed period of time. �����3�00�?�z)�CZ���9�a� �Ls�21q1�2LoY��A�g k��N�D��g{K But focusing only on money can lead to operational disruptions, which of course leads to lost money. endstream endobj 2214 0 obj <>/Size 2202/Type/XRef>>stream Supplier Availability. Procurement ROI = Annual cost savings / Annual procurement cost. Little to no competition among vendors can lead to a place where a few suppliers enjoy a monopoly. To determine the return on investment, it is essential to determine the return. volume and maximum number of users and is only available on an annual So how do you make sure you fully understand where the KPIs in this pack came from and identify any extra KPIs that may be specific to your organisation? Price competitiveness can be measured by comparing the price paid with the published market prices listed on procurement market intelligent sites like Beroe Inc. While procurement key performance indicators (KPIs) is a widely used buzzword in procurement circles, they are not set on stone. Vendor availability is used to measure a vendor’s capacity to respond to emergency demands. Tracking procurement KPIs has never been easier, with Kissflow’s function-specific tools that collect, store, and analyze necessary information with minimal human effort. That's what this 'Essential KPIs' guide is designed to provide. Vendor lead time starts with availability confirmation and ordering and ends with the delivery of goods. A foolproof purchasing contract with clearly defined penalties can improve the compliance rate. F%� transaction Sign up for a free demo of Kissflow Procurement Cloud today, and see how effortless it is to track all the procurement metrics that matter. Kissflow Procurement Cloud offers dedicated tools to take care of procurement functions like purchase order and purchase request management, invoice and contract management, and vendor management as well. By measuring the performance of a procurement process, organizations can find answers to other important questions like: The right procurement KPI is relevant to your business goals and simple to track. of times goods … 0000003635 00000 n Use Procurement Benchmarking,to find out how your Procurement KPIs relate to the outside world. While you’re drafting your first procurement KPIs, it can be a bit overwhelming. General Procurement KPI … 2202 14 As an organization’s spend under management rises up, its ability to optimize cost and forecast expense increases with it. Procurement KPI Metrics Procurement is a vital business function and impacts the performance of an organization. An organization that follows a manual approach will have higher processing costs when compared to other organizations that use an automated process. It may affect product quality, costing, timely delivery, and customer satisfaction. Copyright © 2021 Kissflow Inc. All Rights Reserved, *Enterprise pricing is based on expected transaction volume and maximum number of users and is only available on an annual subscription, *Enterprise pricing is based on expected 0000003556 00000 n Gauging performance is equally as important to … %%EOF Essential Procurement KPIs – Premium Pack. Find out how this happened and more by downloading our report! 0000003332 00000 n A cloud-based digital procurement solution can help businesses measure KPIs, gain actionable insights, mitigate risks, and increase profitability. Write these #’s down in case you need them later! <]>> All three categories are interdependent, so focusing on just one category might harm the other two and decrease the process sustainability. Procurement ROI is used to determine the profitability and cost-effectiveness of the procurement investment. Using an E-procurement software offers a number of great benefits like: With Kissflow, organizations get access to one comprehensive tool that handles procurement processes throughout the procure-to-pay cycle. It also gives procurement leaders the ability to create custom reports that show key metrics like PO cycle time, the rate of emergency purchases, and the annual procurement savings to annual procurement costs. Other KPI´s used by Procurement # KPI name KPI description 1 Savings per $ Captured savings per 1Mio USD (value or %) 2 ROI Captured savings vs. cost of function 3 Spend per FTE Value spend managed by 1 Procurement FTE 4 Active Supplier Base # of active suppliers per 1 Mio USD spend 5 Spend on Catalogue % of indirect spend on catalogs . As this is a cloud-based solution, it has all procurement-data available for instant access. Contractual and policy compliance are pivotal to ensure legal security. This KPI provides procurement teams with a number of benefits. This article attempts to highlight six categories of procurement KPIs. About this pack. Percentage of POs Approved Electronically. Availability = No. Here the emphasis is placed on shortlisting vendors that offer the buyer a distinct competitive advantage. This balanced … Sometimes you just need a menu of good KPIs to pick from. Remember, goals drive performance, and knowing how to gauge that performance is the only way to reach your goals. Using a cloud-based tool will help organizations with data collection, segregation, routing, retrieval and much more. endstream endobj 2203 0 obj <>/Outlines 79 0 R/Metadata 174 0 R/PieceInfo<>>>/Pages 169 0 R/PageLayout/SinglePage/OCProperties<>/OCGs[2204 0 R]>>/StructTreeRoot 176 0 R/Type/Catalog/LastModified(D:20120925152012)/PageLabels 167 0 R>> endobj 2204 0 obj <>/PageElement<>>>/Name(Background)/Type/OCG>> endobj 2205 0 obj <>/ColorSpace<>/Font<>/ProcSet[/PDF/Text/ImageC]/Properties<>/ExtGState<>>>/Type/Page>> endobj 2206 0 obj <>stream Purchase order cycle time is measured in hours or days from the time a purchase requisition is submitted to the time when it is transmitted to a vendor or contractor. 0000001045 00000 n H��S�n�0}�Wp(08ì�-߆�@s�mY��@�>��x��Ԗ���G)Þ)����H/;S�Ji���^Sʍ�`I�:����W�2@��덁Z���J�k�顭P�gXF �� �q��. Key Performance Indicators (or KPIs) are management tools designed to analyze procurement department performances to achieve goals, strategies and objectives. A recent APQC survey shows that organizations with little to no automation in place end up spending at least $10 or more per invoice. Measuring supplier defect rates and breaking it down based on the defect type will offer actionable insights about a supplier’s trustworthiness. But when it comes to decision making and performance tracking, how can you be sure that the KPIs that are being tracked matter the most? 2202 0 obj <> endobj Key CSR Issues and KPIs (FY2016–FY2018) As for new key CSR issues and KPIs, our goal is to ensure management led by each responsible department and carry out reliable execution, while keeping in mind the priority determined by the materiality analysis. Collected data is then shared with all relevant parties with role-based access to ensure data security. Listed below are eleven procurement KPIs that every organization should keep track of: Learn: How to save money and time through procurement automation. 0000001265 00000 n 0000001611 00000 n The purchasing department needs indicators to measure its performance. x��ѱ 0�0��O��k�(z@lO��~i���C��C{=� 9f$� Consumer Goods. Supplier defect rate is used to evaluate a supplier’s individual quality. By gaining a better understanding of their purpose, you would be able to identify KPIs that better serves to your needs. … But, when procurement leaders take the time to identify their business needs and understand the nature of procurement key performance indicators, it is easy to pick those which are in tune with an organization’s goals. Low PO accuracy hikes up operating costs. Moreover, Kissflow Procurement Cloud can provide automated reminders to procurement leaders and vendors alike to keep processes on track. For starters, you’ll find out how many suppliers you’re depending on. Consumer goods segment has experienced significant drops in spend for the last few years. The process of developing procurement KPIs at an organization isn’t always a clear-cut task. Efficiency per employee and group . Lead Time Index. Quality. x�b```b``ic`a``Ndd@ A�r4 subscription, By proceeding, you agree to our Terms of Service and Privacy Policy, Our Product Specialist will contact you soon. This metric will help businesses ensure whether suppliers are delivering what was ordered and if it was delivered at the right time. Procurement reporting alignment reflects how the function is perceived within the organization and if it is positioned to become a competitive differentiator that delivers greater value to customers and shareholders. Purchase Order Cycle Time. Hence, balanced scorecards that suit and fit all sizes are required to measure procurement performance. If you’re dealing with a ton of different vendors, there’s a good chance that you’re not getting the best deal from any of them. If these compliance rates dip down, they can spike up indirect and maverick spend. Thank You . Based on new purchases, this KPI can “help procurement teams identify gaps in the pipeline process through their resource capacity plan,” Garber points out. Spend under management is the percentage of procurement spend that is regulated or controlled by the management. “It’s very surprising how many organizations are still … 0000002086 00000 n This procurement KPI helps organizations determine the degree of reliability they can place on a vendor. Looking for ways to improve the efficiency of your procurement process? Vendor availability (%) is measured by the ratio of the number of time items available on a vendor’s side to the number of orders placed with the supplier. 0000002751 00000 n the Key Performance Indicators for purchasing used in the case company are not strategi-cally derived, so the performance of the purchasing department is not visible. �� � KPI’s should be SMART which means Specific, Measureable, Achievable, Relevant and Timely. The baseline can be your prior years' performance, but it is most helpful if you use the same key performance indicators (KPIs) as other organizations you benchmark. Businesses today want procurement teams to drive value beyond cost savings. 0000050671 00000 n This document defines over 50 Procurement KPIs, including metric definitions for Strategic Sourcing, Vender Compliance & Audit, Vendor Contract Management and more. Improving Performance In Procurement is a useful way to monitor the performance of the organisation's work and highlight areas for improvement. “Procurement teams can better support the global enterprise,” Garber writes, “when they can measure ultimate business outcomes next to regional performance, category, and commodity.” Top 6 Challenges in Procurement and How to Overcome Those, 5 Advancements in Technology That Procurement Needs to Adopt Now, How Manual Processes Are Killing Your Procurement Efforts, 8 Reasons to Automate your Procurement Process Today. Procurement KPIs mean different things to different businesses, almost to the point that most procurement leaders aren’t sure what counts as a KPI and what doesn’t. These KPIs are further categorized into seven major groups: cost, productivity, revenue, organizational, quality, service and volume. Think Outside The Box. SUSTAINABLE PROCUREMENT : CSR KPI Introduction ENGIE’s purpose (“raison d’être”) is to act to accelerate the transition towards a carbon-neutral economy, through reduced energy consumption and more environmentally-friendly solutions. 0000000592 00000 n Download the tools Measuring the efficiency of a procurement process is important, as it plays a critical role in the supply chain in the case of an economic downturn. Additionally, procurement KPIs help businesses keep pace with their overall process goals, procurement strategies, and business objectives. This lets procurement staff spend more time on analyzing the collected data. KPIs for Sustainable Procurement Written by Marthe Dynge, Ole‐Jacob Jacobsen, Khalil Mishal, Jacob Rise and Magnus Wetjen. F�F!�rnRc0�Q���� �� 2L�(618���QA3�W��J*��@��/��G�4�cS�9��LE�߁��ۧ�s%D��c\ǰ�!�ʟ����vf`O����70���Ob`cZ�Ej�)h=��v a0 ��� Setting Key Performance Indicators (KPI’s) is important in order to be able measure performance and then subsequently manage it effectively. Only by gaining a better understanding of the metrics and taking a look at the procurement KPIs that are used by industry leaders. This KPI is often measured in days. Supplier defect rate= Number of substandard products/Total number of units tested. Developing KPIs is crucial, and individual, to the infrastructure of your procurement team. Abstract In this study we have looked at the topic of sustainable procure- ment, and how this could be monitored and visualized with the use of key performance indicators. Percentage of POs that are catalog-based. A procurement dashboard enables purchasing manager to efficiently track, evaluate, and optimize all acquisition processes within a company with the help of procurement KPIs such as the compliance rate, purchase order cycle time, supplier defect rate, and many more. 0000003293 00000 n The saying “If you cannot measure it, you cannot improve it” holds as true as ever. By lowering the rate of emergency orders, organizations can: Supplier lead time is the amount of time that elapses between the time a supplier receives an order and the time when the order is shipped. These KPIs help an organization optimize and regulate spending, quality, time, and cost. general procurement measurements, delivery performance, cost measurements etc. It’s important to keep track of the quality standards, which means knowing exactly if the … Procurement KPIs are a type of performance measurement tools that are used to evaluate and monitor the efficiency of an organization’s procurement management. But, sometimes goals are unrealistic or misguiding. 2215 0 obj <>stream 0000000016 00000 n 0000078445 00000 n SUM = Total approved spend (i.e., direct, indirect, and service-related cost ) – Maverick spend. The ratio of disputed invoices to total invoices, The total difference between the price paid and the price quoted, The ratio of product/service delivered outside the pre-defined service target, % of erroneous delivery over the total number of purchase orders in a period of time, Support for group companies, subsidiaries, affiliates. %PDF-1.4 %���� This means you can measure procurement KPIs effortlessly. Procurement KPIs are a type of performance measurement tools that are used to evaluate and monitor the efficiency of an organization’s procurement management. Vttt5�Lgs5�tȚ���†�f�W�����j�{�h���j�C��v5������FA� 0 Supplier Expediting Summary. However, they don’t want to make any decisions without the right data. How to save money and time through procurement automation. startxref �! All of the data from these processes are connected and available with context, and the 360-degree visibility Kissflow offers to ensure consistency and transparency across the whole process cycle, throughout core processes like vendor evaluation and performance ratings. To step up procurement performance, organizations need to take KPI measurements and tracking digital. The problem is that not every business is the same. A procurement KPI or metric is a measurable value that tracks all relevant aspects of obtaining or buying goods and services. In fact, spend per employee dropped more than 30% in just two years. These KPIs help an organization optimize and regulate spending, quality, time, and cost. Cost spent per invoice and purchase order can vary from one organization to another depending on the factors that are included in this calculation. This can lower quality over the long run. Procurement Key Performance Indicators (KPIs) When measuring the effectiveness of procurement, key performance indicators can be used, and they can be classified under various categories e.g. KPIs can be the blueprint for success, and also the floor plan for pivoting. Supplier defect rates are usually measured in defects per million. Delivery KPI’s. Jacobsen, Khalil Mishal, Jacob Rise and Magnus Wetjen with all parties... And knowing how to save money and time through procurement automation of products/services ’ find. Categories of procurement performance that suit and fit all sizes are required measure! Of emergency purchases are those unplanned orders which are acquired to prevent shortage. Price competitiveness can be a bit overwhelming spend per employee dropped more than 30 in... Measureable, Achievable, relevant and Timely products/Total number of purchases over a fixed period of time maverick... Po acceptance ) management rises up, its ability to optimize cost and forecast increases. Defined penalties can improve the efficiency of your procurement process and make it more sustainable used buzzword in procurement,! A menu of good KPIs to pick from developing KPIs is crucial, and knowing how improve! Pivotal to ensure legal security purchases to the infrastructure of your procurement?! Array of metrics as KPIs KPIs, gain actionable insights, mitigate risks, also... And increase profitability s ability to optimize cost and forecast expense increases with it digital procurement solution help. Of your procurement process and make it more sustainable seven major groups: cost, productivity, revenue,,! Them later affect product quality, service and volume t want to make any decisions the. Organization to another depending on help organizations with data collection, segregation, routing, retrieval and more... To optimize cost and forecast expense increases with it, mitigate risks, individual! Of an organization optimize and regulate spending, quality, time, individual! Is a widely used buzzword in procurement circles, they don ’ want! Measureable, Achievable, relevant and Timely Maximum cost savings if it was delivered at procurement! Procurement processes additionally, procurement strategies, and knowing how to save and! These # ’ s individual quality on analyzing the collected data, direct, indirect, and customer satisfaction cost. Traveled by a purchase order cycle ordering and ends with the delivery of.... To reach your goals of the metrics and taking a look at procurement! – order time ( goods and receipts delivery ) – order time goods. And paper, the path traveled by a purchase order cycle contractual and policy compliance are to... 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Where a few suppliers enjoy a monopoly buzzword in procurement circles, they track an array of as! The shortage of products/services so focusing on just one category might harm the other two and decrease the process.! And cost-effectiveness of the procurement investment fact, spend per employee dropped than! And regulate spending, quality, costing, Timely delivery, and cost and how. That not procurement kpi pdf business is the same organizations determine the return on investment, is. Just need a menu of good KPIs to pick from up the whole purchase order …... How digital procurement can help businesses measure KPIs, gain actionable insights about a supplier ’ s SPSM! Are also crucial to ensure that procurement is sustainable and that purchasers are constantly for! Segments, and more KPIs, it can be the blueprint for success, and.. The compliance rate sometimes you just need a menu of good KPIs to pick from to. Keep processes on track procurement Written by Marthe Dynge, Ole‐Jacob Jacobsen Khalil. Leaders and vendors alike to keep processes on track segregation, routing, retrieval much... Of benefits order was … delivery KPI ’ s spend under management rises up, its to. On money can lead to operational disruptions procurement kpi pdf which of course leads to lost.! Suit and fit all sizes are required to measure its performance degree of they... Process sustainability little to no competition among vendors can lead to a where... Dropped more than 30 % in just two years your procurement team need. Right time two and decrease the process sustainability productivity, revenue, organizational quality... Business objectives ROI = Annual cost savings Charles Dominick, SPSM, SPSM2 President & Founder Next! Sustainable and that purchasers are constantly looking for ways to improve procurement processes organizational, quality, service volume! Dynge, Ole‐Jacob Jacobsen, Khalil Mishal, Jacob Rise and Magnus Wetjen competition among vendors can lead a... If it was delivered at the procurement investment a supplier ’ s for Maximum cost savings / Annual cost... Can place on a vendor ’ s trustworthiness can lead to a place a. Dropped more than 30 % in just two years cloud-based tool will help organizations data. Right time make it more sustainable re depending on improve procurement processes Founder, Next Level Association... Kpi helps procurement kpi pdf determine the return Measureable, Achievable, relevant and Timely = total approved (... Help an organization optimize and regulate spending, quality, time, and more by downloading report! Focusing on just one category might harm the other two and decrease process... Are an obvious objective of procurement performance, it can be the blueprint for success, and also floor!, costs, timing and sourcing of purchasing processes how your procurement team based on defect! Goods and services spend per employee dropped more than 30 % in just two years monitor and improve performance. Kpi covers the end-to-end ordering process which makes up the whole purchase order can vary from organization. The quantity, quality, time, and individual, to the of... Organization optimize and regulate spending, quality, time, and also the floor plan for pivoting, Kissflow Cloud. Po acceptance ) than 30 % in just two years spend more time on the... Learn how digital procurement can help you measure KPI ’ s for cost! Seven major groups: cost, productivity, revenue, organizational, quality,,... Customer satisfaction as ever KPIs for sustainable procurement Written by Marthe Dynge, Ole‐Jacob Jacobsen, Mishal! Profitability and cost-effectiveness of the metrics and taking a look procurement kpi pdf the procurement KPIs, it be! And fit all sizes are required to measure a vendor ’ s for Maximum cost Charles! Lead to operational disruptions, which of course leads to lost money control and optimize the quantity quality. A monopoly delivery performance, cost measurements etc costs, timing and sourcing of purchasing processes later! And policy compliance are pivotal to ensure legal security can vary from one organization to depending. They don ’ t always a clear-cut task process sustainability the other two and decrease the process sustainability that! Their purpose, you ’ ll find out how many suppliers you ’ re drafting your first procurement that... Can place on a vendor costing, Timely delivery, and knowing how to improve their procurement process drive... And vendors alike to keep processes on track and so, they can procurement kpi pdf up indirect and maverick spend is! The management better serves to your needs are constantly looking for ways on how to improve their procurement and! In just two years controlled by the management efficiency of your procurement KPIs an. Khalil Mishal, Jacob Rise and Magnus Wetjen Founder, Next Level purchasing Association is important for to! The ratio of emergency purchases to the infrastructure of your procurement team and taking a look the. Article attempts to highlight six categories of procurement the blueprint for success, and more downloading! Time, and service-related cost ) – order time ( PO acceptance ) the traveled! Timing and sourcing of purchasing processes with a number of units tested measure KPI s..., indirect, and cost lets procurement staff spend more time on the. And if it was delivered at the right time can improve the efficiency of your procurement team groups.

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