As
we all know that evaluating performance indicators in procurement is a compiled
but complicated process. It is important for that data to be actionable and
measureable. After working on several KPI’s we have found some multiple
indicators divided into Quality related KPI and Cost related KPI’s.
Quality
Related KPI’s:
Continuous improvement in defect rates leads to quality
performance and this can be measured by defect measuring processes towards the
betterment of quality.
- Procurement Cycle Time
- Delivery date and time
- Contract & Compliance of Product
Cost
Related KPI’s:
These KPI’s provides a road map towards the cost saving
in procurement processes that how much money been saved by the purchase
department on an order. For example if a product was of $2000 and your
negotiating person was able to reduce the cost for your company to 1800$ i:e
200$ or 20% savings for your company. This can be applied to other items as
well.
- Future Cost Reduction
- Managing Total Spend
- Return on Investment
The aggregate amount of money procurement saves by
holding and reducing the total cost of ownership. And these measures also
contribute to the purchase departments to their financial success in an
organization.
If you want to accurately determine that how your
procurement processes are performing, then these key metrics will be used to
facilitate and measure benchmark supply management efficiency and
effectiveness.
Stay tune with us for procurement transparency and its
classifications, and also know about all compulsory tools of strategic sourcing
in our next blog.