As we wrap up Q1, Shaz Khan discusses which KPIs are crucial for procurement teams. Procurement software can automate and simplify data analytics for software teams. Read on to see what sort of key performance indicators you should be analyzing.
Which KPIs are most important for procurement teams to measure?
“So you have your typical KPIs, which are:
“How long does it take me to actually create a purchase request, approve it, and get it out to the supplier?
Document Process Cost
“What is my cost per purchase order? Cost per invoice? Which are basically the total cost that includes systems, postage, manual intervention, labor, so forth.
Compliance Against Contract
“Are you buying against the contract? Are you buying from the right suppliers or just going to any source? If you see a trend where you are only buying 40% catalog compliance, you should probably be doing a better job of getting that spend in contract.
“I think overall supplier measurement is huge. How are they performing? What’s their benchmark? What information are they providing? What’s the key performance indicators we are applying to providers? Delivery, price adjustments, overall coolness factor of working with a supplier? Do they have innovation labs? What’s their credit rating? Then combine all of that into a risk score and a performance score
Cycle Time for Processing Data Analytics
“How are we managing our tasks? Are we paying our suppliers on-time? Or are we one of those companies that do not pay their suppliers on time and have a bad reputation? That’s a huge problem.
“Companies can leverage themselves at the expense of the supplier by saying we are going to pay you net 120. Small business suppliers will have a very hard time doing business with that company even though they desperately need that business. What happens is you’ve stopped the velocity of cash for that supplier. Then they struggle because they are running their business on the assumption that they will get paid in 120 days, so when you pay them late, they will end up going to the open market to try to recover that debt for pennies on the dollar.
“That’s not the right way to do business. The right way to do business is to collaborate with suppliers because your success is tied to that supplier’s success. If they go out of business, you are going to have to go through an expensive rebidding process to replace that supplier.
“You see, the supply chain is actually an incredible area for innovation.”