11 Metrics that matter.
These are the metrics that will take you way beyond the traditional cost savings ones.
They’re stakeholder focused and will deliver such a huge uplift in your performace.
I’ve teamed up with Vertice to provide you these and you can download a brilliant report here that goes into much more detail as well as gives superb visuals for how to represent these in a dashboard.
Approval Times per Function:
Definition: Measures the time taken for procurement approvals within different departments or functions.
Application: By analysing approval durations across departments, procurement teams can identify bottlenecks. For instance, if the marketing department consistently takes longer to approve purchases, targeted interventions can streamline their processes.
Example: If the average approval time in the IT department is 2 days, but it's 5 days in finance, the procurement team can investigate and address the delay in the finance department.
Difference Between Time to Complete Renewals vs. New Purchases:
Definition: Compares the time taken to finalise contract renewals against initiating new procurement contracts.
Application: A significant disparity may indicate inefficiencies. For example, if renewals take longer than new contracts, it might suggest complacency or overlooked complexities in the renewal process.
Example: If new software licenses are procured in 3 weeks, but renewals take 5 weeks, your team should assess the renewal process for potential improvements.
Industry-Specific and Tiered Vendor Benchmarking:
Definition: Evaluates suppliers against industry standards and categorises them into tiers based on performance metrics.
Application: This helps in understanding supplier competitiveness and reliability. For instance, benchmarking can reveal if a supplier's pricing aligns with industry averages.
Example: A supplier charging 15% above the industry average for similar quality products might be reconsidered or renegotiated with.
Majority Spend Suppliers:
Definition: Identifies suppliers that account for the largest portions of the procurement budget.
Application: Recognising these suppliers allows for focused relationship management and risk assessment.
Example: If 60% of procurement spend is with two suppliers, any disruption with them could significantly impact operations, necessitating contingency planning.
Maverick Spend:
Definition: Purchases made outside established procurement processes.
Application: Monitoring maverick spend helps enforce compliance and control costs.
Example: If departments frequently bypass procurement protocols for quick purchases, it can lead to higher costs and contractual risks.
Procurement Requests Completed and Time Spent per Request:
Definition: Tracks the number of completed procurement requests and the time invested in each.
Application: Provides insights into team productivity and process efficiency.
Example: If the average time per request increases, it may indicate process inefficiencies or resource constraints.
Procurement ROI:
Definition: Measures the return on investment of procurement activities.
Application: Demonstrates the value delivered by the procurement function.
Example: If procurement initiatives save £500,000 annually with an operational cost of £100,000, the ROI is 400%.
Requests Outstanding:
Definition: Monitors pending procurement requests.
Application: Helps manage workloads and prioritise tasks.
Example: A high number of outstanding requests might indicate understaffing or process bottlenecks.
RFP Turnaround Times:
Definition: Assesses the speed at which Requests for Proposals are completed.
Application: Enhances responsiveness and competitiveness.
Example: Reducing RFP turnaround from 30 to 20 days can accelerate project timelines and improve supplier engagement.
Spend Under Management:
Definition: Determines the proportion of total spend managed by the procurement team.
Application: Evaluates procurement's influence and effectiveness.
Example: Increasing spend under management from 70% to 85% indicates better control over spend.
Supplier Compliance Rates:
Definition: Ensures suppliers adhere to contractual obligations and regulatory requirements.
Application: Maintains operational integrity and mitigates risks.
Example: A supplier with a compliance rate below 95% may require corrective action or replacement.
Which of these are you already measuring? If the answer is none, consider implementing just three in your dashboard this year.
