Top 10 procurement KPIs to watch out for in 2022
KPIs, key performance indicators, are measurements which tell a business how their products are doing.
Computer software company Bid Ops has listed its Top 10 procurement KPIs, which it anticipates will matter most in the new year. What do you think of the list?
10: Cost savings tracking
This is an easy chart topper for any procurement-related Top 10. All organisations are keen to spot a way to save money, and for the procurement team, cost saving is a high priority.
09: Cost avoidance tracking
On the back of purchase price variance, cost avoidance can be an essential part of the overall cost savings equation.
The cost avoidance tracking KPI shows how much money is being saved through avoiding preventable spending.
08: Purchase price variance (PPV)
Purchase Price Variance (PPV) can derail any budget and it occurs when more is spent than what was originally planned.
Tracking this KPI shows how effective the procurement process is.
07: Purchase request cycle time
Over the past two years, the need for supplier speed has become clear to procurement teams - and the next 12 months could have anything up its sleeve. After various supply chain shortages and logistics challenges, procurement teams must move with resilience to secure materials and transportation. Procurement teams will have to watch their purchase request cycle time KPI carefully, keeping it as low as possible.
06: Supplier diversity
Last year, ‘corporate social responsibility’ was number nine on the list. For Bid Ops, supplier diversity has jumped to no.5.
Consumers and shareholders are on the lookout for businesses which mean what they say and do not just amplify their diversity in advertisements.
The supplier diversity KPI has been an important one for procurement teams over the past two years - and it won’t be going anywhere.
05: Supplier performance
From supplier risk, it’s another perfect segway to… supplier performance.
For a procurement organisation to meet its targets, it must be able to trust its suppliers. One of the important procurement KPIs is to monitor their performance.
At a time when ethical sourcing is growing increasingly popular among consumers, procurement teams will be more vigilant of supplier ESG records.
04: Supplier risk
A perfect follow up of course, is supplier risk.
This is another key KPI which must be tracked. With ongoing supply chain challenges, for political or environmental reasons, organisations will continue to be resilient and adapt quickly to any shortages in 2022.
This can mean pivoting from regular suppliers to alternatives, but each new supplier needs to be assessed for potential risks. Being aware of possible risks before entering into a contract, lowers the risk of a poor outcome.
03: Supplier geography
Last year, we suggested that supply chain cycle time would be a high KPI for the next 12 months. This refers to the longest lead-time it would take to fulfil a client order if inventory levels were at zero.
This year, it is supplier geography in at no.8. In procurement’s risk management, knowing where suppliers are located is crucial. In the last year, it’s not just been the impact of Covid on suppliers, but also the deadly floods across Europe and China. Accurate supplier geography KPI can provide a warning for procurement teams if suppliers are impacted.
02: Procurement NPS
A Net Promoter Score identifies customer-centric companies, using a ratio of customers who would recommend it versus those who would not.
A supplier with a high KPI for NPS offers value and one that falls behind is a red flag.
01: Real-time KPI tracking
KPI reports can be manually generated, which is helpful for analysis. But in the superior approach, Bid Ops predictive procurement software provides KPI dashboards with:
- Real-time data
- Exception alerts
Through using Bid Ops’ KPI dashboards, procurement teams can make necessary adjustments in real-time.