While cost savings remain the end objective of procurement functions, companies are not just restricted to that. They track the right procurement KPI metrics to measure the performance of their procurement process. Evaluating the right procurement KPI metrics enables companies to optimize and regulate spend, quality, time, and cost. But how do companies know that the procurement KPIs that they are tracking matter the most? By gaining a comprehensive understanding of the procurement KPIs used by leading companies. Here’s the key procurement KPI metrics that companies must be aware of.
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Key Procurement KPI Metrics
Procurement KPI metrics #1: Quality
Quality is one of the key procurement KPI metrics that companies should take into consideration for sustainability. The key factors to include are:
Supplier quality: Gaining actionable insights into the suppliers’ performance is critical for companies. Measuring supplier defect rates can help companies evaluate a supplier’s individual quality and examine its trustworthiness.
Purchase order accuracy: Inaccuracies in purchase orders can augment operating costs for businesses. Such procurement KPI metrics would help businesses ensure if the supplies ordered were according to demand and delivered at the right time.
Compliance issues: Compliance with regulator norms in the respective supply markets is imperative to ensure legal security. Dip in compliance rate can spike up maverick spend and increase the chances of getting penalized.
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Procurement KPI metrics #2: Delivery
Unplanned orders: Any unplanned order acquired to prevent the shortage of products or services is termed as an emergency purchase. The lower number of emergency purchases reflects the efficiency of the procurement function.
Supplier efficiency: The efficiency of suppliers can be better measured in terms of lead time. Supplier lead times is one of the important procurement KPI metrics that businesses must calculate without fail. It starts with availability confirmation and ordering and ends with the delivery of goods.
PO cycle time: The purchase order cycle covers the end-to-end ordering process. It is crucial for companies to count the cycle times from the time purchase requisition is submitted.
Improving delivery time is crucial for companies to boost brand value. Stay a step ahead by requesting a free demo of our procurement platform to gain exclusive insights into procurement KPIs evaluated by leading organizations.
Procurement KPI metrics #3: Cost savings
Invoice cost: Cost per invoice varies greatly from organization to organization. Having an automated process can significantly reduce the processing cost when compared to manual approaches.
ROI: It is an important key metrics for companies to determine profitability. It helps analyze the cost-effectiveness of their procurement investment.
Spend management: For companies to optimize cost and forecast expenses, it is critical to improving spend under management. It is the percentage of procurement spend that is controlled by the management.
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