10 Useful Metrics and KPIs for Procurement in 2021

By Tom Swallow
Procurement magazine explains ten useful KPIs in 2021 and how they can be used to measure procurement performance...

How can businesses implement a procurement strategy without analysis? 

As procurement becomes increasingly prevalent in the everyday operations of supply chain businesses, it’s important for CPOs to understand what options they have for analysing their current procurement processes. We delve into ten metrics that can provide vital insights that procurement leaders can include in their procurement strategies. I return. Victorious, of course. 

10: Supply chain cycle time

The supply chain cycle time refers to the longest lead-time it would take to fulfil a client order if inventory levels were at zero, including time for procurement, waiting times, completing the order and shipping. 

This metric will highlight any issues with efficiency and points where the company could be more competitive.

09: Corporate social responsibility

Corporate Social Responsibility requires a general observation of how operations are kept in line with the company values. CSR can be demonstrated through green practices, ethical sourcing and sustainability strategies.

Companies can measure CSR by determining short-term and long-term goals for CSR programs and incorporate measurable KPIs.

08: Proportion of digitally enabled suppliers

A percentage to show how many suppliers are utilising technology has its benefits for businesses who want to maximise digital transformation. This figure determines which suppliers can access their information through similar systems, therefore allowing companies to implement an integrated software system.

(Digitally enabled suppliers/total of all suppliers) x 100

07: Proportion of competitive spend

The proportion of competitive spend is a metric that assesses advertising spend based on a set product or category. Request for proposal (RFP) documents are important for this metric. An RFP can be compared to a design or marketing brief to source the required promotional assets.

(Advertising spend/entire market spend in same product or category) x 100

06: Spend under management

Spend under management is an overall measure of how much ‘spend’ a given company moves through its procurement department. This provides an insight into how an organisation can achieve greater control over their spending. 

Digital tools, such as inventory systems, can be used to record spend analysis and sourcing activities.

05: Raw materials cost as a percentage of COGS

This measure provides a percentage of the Cost of Goods based on the direct raw materials used but does not include indirect raw materials. This metric determines whether a business has high material costs, which could suggest over purchasing of materials or a need for renegotiation of price. It may also highlight the use of low-quality materials, which often have to be reworked. 

(Direct raw materials expense including direct labour/total COGS) x 100

04: Warehouse space utilisation

Understanding how warehouse space is managed can provide a lot of insight into capacity, efficiency and inventory value. This metric gives the utilisation as a percentage of the total warehouse capacity. As a result, this percentage will determine whether there is extra capacity available.

(Square meterage used/total square meterage) x 100

03: On-time delivery: all suppliers

On-time delivery refers to the number of products delivered on time. This involves measuring the time from when the supplier ships the order to the point of receipt by the business. Using this metric allows companies to optimise their inventory, end-customer delivery time, and ultimately customer satisfaction.

(Quantity of on-time shipments/Total shipments) x 100

02: On-time delivery: single supplier

On-time delivery refers to the number of products delivered on time. Measuring this for each supplier will establish their reliability in percentage form. To maximise the relationship with a supplier, this is an effective metric to use. 

(On-time orders/all orders by a single supplier) x 100

01: Undamaged shipment rate

This metric is used to indicate how the number of damaged goods affects the time it takes to deliver the product. The method may also provoke questions about the delivery method and integrity of the transit packaging. 

(Total amount of undamaged orders received/Total of all orders received) x 100

Share

Featured Lists

Top 10 IT Procurement companies

As Tech develops at an exponential rate, only those procurement strategies with tech baked-in will succeed. Here are the Top 10 IT Procurement companies...

Top 10 Procurement competencies and skills

Under mounting global pressures, procurement has stepped into the arena of critical players. Here's our list of top 10 procurement skills & competencies

Top 10: Procurement platforms - SAP Ariba & Oracle lead way

SAP Ariba, Oracle Fusion Cloud, Coupa, GEP, Unite Mercateo, Workday & Basware lead way in top 10 procurement platforms

Top 10 reasons to digitise your procurement systems

Procurement Strategy

Top 10: Company partners for procurement risk management

Risk Management

Top 10: Companies supporting women leaders in procurement

Procurement Strategy