When measuring the performance of your procurement operation, it can be difficult to see beyond a complex set of rules and processes. However, breaking performance down by specific KPIs allows you to really examine each factor and improve it if needed.
There are several KPIs essential to procurement, but the unofficial top five—total cost savings, cycle time and delivery, spend, ROI and compliance—should be examined above all other assessments. Here, we take a look at how to measure, consider and factor cycle time and delivery into how well your procurement processes are working.
Defining Cycle and Delivery Time
The cycle time of a procurement order is the length of turnover time between placing the purchase requisition and the purchase order being sent. Often times it also includes the time spent requesting quotes from suppliers and choosing the eventual winner. Whether measured in days, months or working hours, ensure you are handling cycle time appropriately.
Measurement of delivery time performance is the comparison of how long it took for the actual order to be delivered against the promised schedule. You can also consider if the delivery time, either early, late or on-time, affected your own business operations. For instance, if you ordered material necessary for getting your product out on a tight timeline, and it is late, your product would then be released late.
Procurement cycles have a significant domino effect on the rest of a company’s procedures. This is why it’s one of the most crucial performance KPIs to recognize and monitor.
Avoiding Delays and Finding Success
To optimize your cycle time and keep your deliveries on schedule, forge strong working relationships with your suppliers. A good relationship is built on trust and a mutual understanding of expectations. Holding your suppliers accountable for following through on a promised delivery time is the link of a relationship that positively impacts your procurement cycle time.
Investing in a mobile procurement platform can shorten your cycle time by providing all the information needed for research, quotes, ordering and purchasing in one place. This platform also gives you the ability to closely manage and oversee all processes to make sure they are coming in on schedule.
To avoid delays, simplify your procurement actions, and always come in on time, measure the performance of your cycle and delivery times.