• Ankit Goyal 25/11/2015 04:07AM

    In Category Management

    What do you think are 3 key metrics (KPI's) to evaluate procurement function?

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  • Answers (25)

  • Trevor Black

    07/12/2015 02:06PM

    This issue keeps raising it's head and I believe some professionals need to seriously think about the relevance and usefulness of some of these KPI's. For example if you are achieving cost savings month on month, where were you starting from? I would challenge anyone who claims that they meet a savings target on this basis. I also challenge who is it that establishes the KPI in the first place. From experience many come from the top of someone's head and is not based on achievable criteria. Also remember that KPI's are supposed to serve you and not the other way around. I do not want be on the Board of Directors, analysing mindless KPI's that are not relevant to the objectives of the business. If you have more the six you seriously have a KPI addiction. Keep it simple and focus on:
    1) Supply Chain Security and Risk,
    2) Cost Avoidance,
    3) Value.
    Remember if your business is competitive and the production line has not stopped due to a supply chain problem - it may be because you are just getting on with your job.

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    Ben Joy Couldn't agree more Trevor - KPI's can paralyse, set people off in the incorrect direction if not set with a clear purpose and at 'some' tactical or strategic objective. I've lived it and it's not fun.

    08/12/2015 07:30PM

  • Lilia Lalova

    25/11/2015 11:40AM

    Hello,
    - total amount spent
    - % of reduction of the prices
    - % of on time delivered purchases - this should be connected with a time frame period, considered as acceptable ( for example within -5 to 0 days from stated on the purchase order delivery day)
    - turnover of the stock in the warehouse

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  • Daniel Warnock

    26/11/2015 10:02AM

    Influenceable spend per procurement team member
    Contribution to corporate profit
    Stakeholder/Customer satisfaction

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  • Vaibhav Wardhan

    26/11/2015 05:05AM

    QCD - Quaity, cost & delivery, however you can innovate around these now

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  • Michael Morpeth

    26/11/2015 02:05AM

    1. Stakeholder Advocacy (as measured by surveying our key internal stakeholders, including the Exec level) - are we delivering value to our organisation, whether that be cost, risk, innovation etc in a timely manner
    2. Customer of Choice (as measured by surveying our key suppliers) - are we developing strong commercial and strategic relationships for the benefit of both parties
    3. Procurement Team Engagement (as measured by surveying the Procurement function) - do we believe in the organisational purpose and do we understand our role in making the organisaiton successful

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  • Doris Ferkovic Mikulic

    25/11/2015 09:02PM

    Savings visible in p&l,
    Timeliness of procurement deliverables,
    Managed spent,

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    Royce Salisbury Hi Doris, Do you use software to manage this?

    08/12/2015 06:52AM

  • Paul France

    03/12/2015 12:11PM

    I'd say it depends on the ethics of your organisation. In public sector I would expect to see compliance up there along with quality (time) and value for money.

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  • Ben Joy

    02/12/2015 07:18AM

    I think we need to be honest - its P&L impact and incremental movements period to period. All other measures are only lead measures into the financials

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  • James Bush

    02/12/2015 05:47AM

    Procurement contributions to

    1. Value Creation as a '$ number'- (Bottom Line impact & Top Line impact to EBITDA)

    2. 3rd Party Risk Management as a # of 'events' mitigated or avoided - (Business Continuity, Protection of Brand)

    3. Customer Advocacy as a 'score' - (Your stakeholders, your suppliers and most importantly - your customers)
    - I.e. How we measure this at Telstra and applying that concept to your suppliers and stakeholders (www.telstra.com.au/aboutus/our-company/future/improving-customer-advocacy)

    Pretty hard to pick three!

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    Ben Joy Interesting 3rd party risk measure - I would have thought that this is a 'too late' measure. How about managing risk strategically as an opportunity. Business continuity plans or risk profile completeness would be more beneficial. The focus should be 'what work is proactively impacting a lag measure' such as % of events mitigated.

    08/12/2015 07:24PM

  • Karl Mceneaney

    25/11/2015 06:39PM

    Savings (actual and cost avoidance)
    Speed of activity (selection and contracting)
    Risk (material deviations form risk profile)

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    Benoît Tournant You are one of the only to mention the swiftness. I could not agree more on this.
    I think a procurement department should be organized in such a way that time-to-market is optimized. In many situations I felt like internal stakeholders were bored to comply with the procurement process as it had extended the time to procure...

    30/12/2015 03:25PM

    Karl Mceneaney Hi Benoit, speed to market is key to maximising competitive advantage. The trick is to move fast while still taking only rationale risk, and still optimising value. For me, the key elements to making this happen have been summarised recently when I was introduced to a Purpose / Mastery / Autonomy leadership model that gives a nice framework to think through raising the performance bar in Procurement.

    14/01/2016 10:51AM

  • Vivian Allies

    25/11/2015 02:49PM

    Total Spend per period (Monthly/Qtrly)
    % savings in that period
    Average turnover time for order creation
    % On Time deliveries for same period

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  • Hamzeh Khataybeh

    25/11/2015 07:52AM

    - Saving: In its different approaches [Classical, Avoidance and Contractual Disputes]
    - Adhered to Procurement Plan: If only the organization type of works suit the adherence to it.
    - Time: Tying the loose ends on time.

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  • Ehsan PR

    25/11/2015 07:50AM

    HI
    TOTAL COST SAVING
    QUALITY
    DELIVERY

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  • Reyna White

    23/12/2015 12:21PM

    Streamline Operations
    Create a Sales System
    Focus and Scale Marketing

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  • Fadi Abdul Khalek

    09/12/2015 09:25AM

    1. orders issued based on supplier selections vs orders issued without 2. hands free targets, reflecting price books to reduce procurement resources and operration, 3. supplier base consolidation.

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  • Brett Rodas

    08/12/2015 09:04PM

    On-Time Delivery to External Customer (they pay the invoice!)
    Inventory Levels by $$ and by Slow-Moving/Obsolete inventory
    Days of Inventory On Hand (helps push sales team)
    Savings in Overall Spend or Price per Piece........make sure the data is accurate and easy to extract or it will become a burden and won't help with any analysis.....Have Fun!

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  • raymond sam

    08/12/2015 02:49PM

    Remember that procurement is evolving and the traditional way of measure procurement performance such as; cost, value for money, delivery etc. is giving way to issues like;
    (1) Sustainability e.g. the level of adherence of the supplier to green issue in the production cycle;
    (2) Ethics e.g. checks and balances on modern slavery, bribery & corruption in the supply chain;
    (3) Agility e.g. the level of flexibility in dealing with an unexpected demand.
    etc.

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  • raymond sam

    08/12/2015 02:35PM

    Hello Ankit, I would want to know your suggestions too! what do you think?

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  • Saadat Hussain

    08/12/2015 05:56AM

    1. From approved requisition to delivery 2. Supplier evaluation 3. Cost cutting

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  • Brish Bhan Vaidya

    08/12/2015 04:28AM

    Cost Savings, Supplier Base Optimization & Controllable Spend.

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  • Ed King

    07/12/2015 02:00PM

    In my case, it would be...

    * Ensuring levels of hardware stock and server capacity are maintained within acceptable limits.

    * Keeping direct purchasing spend within budget (which varies according to a formula based around levels of new business).

    * Number of requests for indirect purchases resolved.

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  • Susan Kwan

    07/12/2015 01:39PM

    KPI are in alignment with the organisational goals and overall objectives.
    My views on KPI for Procurement function for purchases goods and services should evaluate
    1) Total Cost of Ownership (TCO)
    2) Spend/Saving Management
    3) Suppliers Management

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    Ben Joy TCO - I am yet to see an organisation measure TCO effectively (so many sub branches) and at leadership level to flimsy with regards to the P&L - too variable and usually used as a tool for change or during periods

    08/12/2015 07:26PM

  • raymond sam

    07/12/2015 12:26PM

    Hello there! I would select (i) sustainability, (ii) Agility, and (iii) service level agreement (SLA).

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  • raymond sam

    07/12/2015 11:27AM

    Hello there! I will go for metrics such as (i) sustainability, (ii) agility, and (iii) service level agreement (SLA). This can be assessed on monthly and / percentage basis (%).

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  • Bianca Asakura

    26/11/2015 10:31PM

    From the total spend, how much is coveraged by Procurement
    Savings
    Compliance / Contracts adherence
    Service Level Agreement (SLA)
    OTIF (on time in full delivery)

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