How to measure Procurement value - Metrics that matter

​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.

1. 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.​

2. 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.​

3. 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.​

4. 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.​

5. 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.​

6. 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.​

7. 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%.​

8. 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.​

9. 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.​

10. 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.

11. 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.