What are Procurement Key Performance Indicators (KPIs) and how DataKITE can help

DataKITE Background – Jane

Procurement key performance indicators (KPIs) are metrics that measure the efficiency, effectiveness, and compliance of the procurement process. They can be used to track progress over time, identify areas for improvement, and benchmark performance against industry standards.

There are many different procurement KPIs that organizations can track, but some of the most common include:

  • Cost savings: This KPI measures the amount of money that the procurement team has saved the organization. It can be calculated by comparing actual spending to budgeted spending or by comparing spending to previous periods.
  • Contract compliance: This KPI measures the percentage of contracts that are fully compliant with all applicable laws and regulations. It is important to track this KPI to avoid costly penalties and fines.
  • On-time delivery: This KPI measures the percentage of goods and services that are delivered on time and in full. It is important to track this KPI to ensure that the organization has the supplies it needs to operate efficiently.
  • Quality: This KPI measures the quality of the goods and services that are procured. It can be measured using a variety of methods, such as supplier audits, customer feedback, and defect rates.
  • Supplier performance: This KPI measures the performance of suppliers on a variety of factors, such as on-time delivery, quality, and cost. It is important to track this KPI to identify and manage supplier risk.

In addition to these general KPIs, there are also specific KPIs that can be used to measure the performance of different aspects of the procurement process, such as:

  • Purchase order cycle time: This KPI measures the average time it takes to process a purchase order from start to finish. It is important to track this KPI to identify areas where the process can be streamlined.
  • Spend under management: This KPI measures the percentage of the organization’s spending that is managed by the procurement team. It is important to track this KPI to ensure that the procurement team is effectively managing the organization’s resources.
  • Procurement ROI: This KPI measures the return on investment of the procurement team. It can be calculated by dividing the cost savings achieved by the procurement team by the cost of the procurement team.

Organizations should select the procurement KPIs that are most relevant to their specific needs and goals. Once KPIs have been selected, they should be tracked on a regular basis and used to inform decision-making.

Tips for using procurement KPIs effectively

Here are a few tips for using procurement KPIs effectively:

  • Set clear goals and objectives: Before you start tracking procurement KPIs, it is important to set clear goals and objectives for your procurement team. This will help you to identify the most relevant KPIs to track and to measure your progress over time.
  • Use a balanced set of KPIs: It is important to track a balanced set of KPIs that measure different aspects of the procurement process. This will help you to get a complete picture of the performance of your procurement team.
  • Use DataKITE: KPIs should be data-driven. Organizations should use data and analytics tools like DataKITE to identify and assess KPIs, develop procurement strategies, and monitor the effectiveness of those strategies.
  • Track KPIs on a regular basis: KPIs should be tracked on a regular basis to identify trends and to ensure that the procurement team is meeting its goals.
  • Use KPIs to inform decision-making: KPIs should be used to inform decision-making at all levels of the organization. This will help to ensure that the procurement team is making the best possible decisions for the organization.

By following these tips, organizations can use procurement KPIs to improve the efficiency, effectiveness, and compliance of their procurement process. If you want to learn more about how DataKITE can help monitor your KPIs clink on the link below.

“DataKITE is one of the best tools I’ve used for really powerful, insightful analysis and visuals.”

Jane Roberts
VP Procurement – Vision 
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