Procurement KPIs
1. Cost Savings :
Direct Cost Savings:
Measures reduction in unit costs or negotiated savings.
Indirect Cost Savings:
Savings achieved through process improvements, avoiding costs, or value-added services.
Cost Reduction Percentage:
Calculated as (Previous cost - New cost) / Previous cost * 100%.
2. Procurement Cycle Time :
Requisition-to-Purchase Order Cycle Time:
Measures the time taken to convert a requisition into a purchase order.
Order Fulfillment Cycle Time:
The time from placing an order to receiving the goods or services.
3. Supplier Lead Time :
Measures the average time taken by suppliers to deliver goods/services from the time the order is placed. Shorter
lead times generally indicate a more reliable supplier.
4. Supplier Compliance Rate :
On-time Delivery Rate: Percentage of orders delivered on or before the expected date.
Contract Compliance: Measures how often suppliers adhere to contract terms, including delivery schedules
and quality standards.
5. Supplier Defect Rate :
Measures the quality performance of suppliers by calculating the percentage of defective products or subpar services
received.
6. Procurement ROI :
Compares the return on investment for procurement activities. It's often calculated by dividing the cost savings by
procurement expenses.
7. Spend Under Management (SUM) :
The percentage of an organization's total spend that is managed by the procurement team. A higher SUM indicates
better procurement control over company expenses.
8. Vendor Availability/Performance :
Measures the responsiveness and reliability of vendors, often evaluated through vendor scorecards that consider
criteria such as delivery accuracy, lead times, and flexibility.
9. Purchase Order (PO) Accuracy :
Percentage of purchase orders issued without errors. This helps in reducing rework and improving supplier
relationships.
10. Contract Compliance Rate :
Tracks adherence to negotiated terms, ensuring that purchases follow established contracts for consistency and cost
control.
11. E-Procurement Adoption Rate :
Measures the extent to which e-procurement tools are used. A high adoption rate can indicate streamlined processes
and cost-efficiency.
12. Inventory Turnover :
For organizations with large inventory, this KPI tracks the rate at which inventory is used or sold over a period,
which helps optimize procurement planning.
13. Percentage of Emergency Purchases :
Measures the proportion of purchases that were unplanned or emergency. A high percentage indicates potential issues
in planning and forecasting.
14. Supplier Risk Assessment :
Evaluates potential risks associated with suppliers based on financial stability, geopolitical risks, and compliance to
reduce supply chain vulnerabilities.
