GITNUX MARKETDATA REPORT 2023

Must-Know Procurement Kpis [Latest Report]

Last Updated: October 31, 2023

Written & Summarized by: Jannik Lindner

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Highlights: The Most Important Procurement Kpis

1. Spend under management
2. Cost savings
4. Supplier lead time
5. Purchase order cycle time
6. Supplier performance scorecard
7. Contract compliance rate
8. On-time delivery rate
9. Rate of maverick spend
10. Sourcing time

Procurement Kpis: Our Guide

Navigate the complex world of procurement with our latest report that succinctly discusses must-know Key Performance Indicators (KPIs). Gain valuable insights on how these KPIs can effectively measure and enhance your procurement strategies, ensuring business growth and profitability. Stay ahead of your competitors by understanding the essential role of these KPIs and how to maximize their usage.

Spend Under Management

This KPI measures the percentage of total procurement spend that is actively managed and influenced by the procurement department.

Cost Savings

This KPI tracks the amount of money saved through procurement activities such as supplier negotiation, volume discounts, or process improvements.

Procurement Return On Investment

This KPI calculates the financial benefits gained through procurement activities divided by the cost of managing procurement operations.

Supplier Lead Time

This KPI measures the time taken by suppliers to deliver goods or services after receiving an order.

Purchase Order Cycle Time

This KPI tracks the average time it takes to process a purchase order, from initiation to order placement.

Supplier Performance Scorecard

This KPI involves evaluating and scoring suppliers based on their performance in areas such as delivery, quality, cost, and responsiveness.

Contract Compliance Rate

This KPI measures the percentage of total spend that adheres to negotiated contracts.

On-Time Delivery Rate

This KPI tracks the percentage of orders received from suppliers within the agreed-upon delivery timeframe.

Rate Of Maverick Spend

Maverick spend refers to purchases made outside established procurement processes or without proper approval.

Sourcing Time

This KPI measures the average time it takes for the procurement team to find, select, and engage a supplier for goods and services.

Frequently Asked Questions

What are Procurement KPIs and why are they important?

Procurement Key Performance Indicators (KPIs) are measurable values that indicate the efficiency, effectiveness, and success of an organization’s procurement processes. They help businesses monitor and improve their procurement performance, manage risks, and identify areas for cost savings and process optimization.

Which KPIs are essential for effective procurement management?

Essential KPIs include (1) Cost savings, which measure the difference between actual and budgeted costs; (2) Supplier performance (e.g., on-time delivery rate, quality of products/services); (3) Contract compliance (percentage of purchases adhering to company-approved contracts); (4) Procurement cycle time (time taken from the initiation of the purchasing process to payment); and (5) Spend under management, reflecting the portion of total company spend controlled by the procurement team.

What role do Procurement KPIs play in supplier relationship management?

Procurement KPIs help in evaluating supplier performance and compliance with pre-established contracts or service level agreements (SLAs). They enable organizations to identify if suppliers are meeting their obligations in terms of quality, cost, delivery, and innovation, which can result in a stronger supplier relationship and enable organizations to collaborate more effectively with their suppliers for continuous improvement.

How can Procurement KPIs contribute to the overall growth of an organization?

By monitoring and optimizing procurement processes using KPIs, organizations can identify and focus on cost-efficient supplier relationships, negotiate better contracts, and prioritize strategic sourcing opportunities. Improved procurement performance results in cost savings, enhanced process efficiency, and risk reduction, which can ultimately contribute to an organization’s overall growth and profitability.

Can Procurement KPIs help in driving sustainability and corporate social responsibility (CSR)?

Yes, Procurement KPIs can be adapted to track sustainability and CSR goals, such as measuring the percentage of spend with suppliers committed to sustainable practices or meeting diversity requirements. By incorporating sustainability and CSR metrics into procurement KPIs, organizations can better align their procurement processes with their overall ESG (Environmental, Social, and Governance) goals, and contribute to a more responsible, ethical, and sustainable business landscape.

How we write these articles

We have not conducted any studies ourselves. Our article provides a summary of all the statistics and studies available at the time of writing. We are solely presenting a summary, not expressing our own opinion. We have collected all statistics within our internal database. In some cases, we use Artificial Intelligence for formulating the statistics. The articles are updated regularly. See our Editorial Guidelines.

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Must-Know Procurement Kpis [Latest Report]

Highlights: The Most Important Procurement Kpis

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