Thursday 5 June 2014

Key Performance Indicator ( KPI ) Strengthen Procurement Process

Authored by Usman Ghani

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.