An organization’s procurement process is intertwined to several other core operations and functions; thus, helping the business to meet their objectives, achieve their goals, reduce costs, and drive profits. Procurement managers make use of a myriad set of metrics to track, monitor, and measure the efficiency of their procurement process. As a result, there are several roadblocks faced by procurement managers while ensuring an effective supply chain management and stream
lining the procurement process. In order to streamline the procurement process, procurement managers must be able to identify the right metrics to track and quantify the impact of sourcing and procurement activities on the organizational objectives. Let’s have a look at the top five metrics that will help procurement managers and chief procurement officers (CPOs) track their performance and ensure efficient supply chain management.
Procurement Process Metrics: Quality
One of the important metrics to measure procurement performance is the quality of materials procured from the right suppliers at the best rate. Procurement managers usually take into consideration the number of defects per thousand to warrant the quality of the merchandise. The number of defects in a consignment or delivery indicate the overall quality of the products obtained from suppliers and result in a delay in the procurement delivery.
Procurement Process Metrics: Cycle time
The best measure to track efficiency is the delivery time or cycle time, i.e., right from placing an order to receiving the materials. In case of delays in the cycle, the procurement managers stand to lose time and often results in delayed production. A quick delivery or procurement cycle time indicates faster production and revenue generation that minimizes labor costs and streamlines operations.
Procurement Process Metrics: Drives Cost-savings
A thorough spend analysis is vital since the organization must identify, evaluate, and eliminate maverick spend to ensure effective supply chain management and stay on track in terms of budget. The actual spend must always be smaller than the budgeted amount, which positively impacts the organizational bottom-line. The procurement managers must follow the golden rule of supply chain management: to procure and source the finest quality products at the right time and the best possible price; thereby ensuring quality, on-time delivery, and minimized costs.
To know more about the metrics used by procurement managers
