22 Essential Procurement KPIs You Should Be Measuring This Year

Procurement KPIs List

Procurement KPIs are measurable values that track the procurement manager, officer, and team’s core efficiencies. Procurement forms a critical part of every successful business organization and is responsible for managing and controlling the costs of purchasing supplies, raw materials, and services.

Procurement Manager Objectives

Procurement Manager KPIs are designed to measure the procurement manager’s ability to engage with and fulfill the job roles. Elements include overseeing and supervising purchasing department employees and activities, drawing up plans to purchase equipment, supplies, and services, and manage and implement the company’s procurement policies and procedures.

  • Oversee and supervise purchasing department employees – This KPI is designed to track and measure the procurement manager’s ability to oversee and supervise purchasing department employees. The higher this metric, the greater the procurement manager’s ability to successfully supervise the procurement department’s employees.
  • Oversee all purchasing department activities – One of the procurement manager’s core roles is to oversee all purchasing department activities to ensure that the department runs smoothly. This KPI tracks and measures the extent to which the procurement manager oversees all purchasing department activities.

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  • Drawing up plans for the purchase of equipment, services, and supplies – This KPI measures the extent to which the procurement manager can draw up plans to purchase equipment, services, and supplies. The higher this metric, the more successful the procurement manager is at ensuring that plans are drawn up to buy the necessary equipment, services, and supplies timeously and within budget.
  • Implement and manage the company’s procurement policies and procedures – The company’s procurement policies and procedures must be implemented and correctly managed. This KPI tracks and measures the procurement manager’s ability to oversee the implementation of these policies and procedures. Secondly, the manager must supervise this process to ensure that the policies and practices are always correctly implemented.
  • Review, compare, analyze, and approve products and services to be purchased – This KPI tracks and measures the procurement manager’s ability to review, compare, analyze, and approve products and services to be purchased. The higher this metric, the greater the extent to which the procurement manager fulfills this role.
  • Manage procurement inventories – The management of procurement inventories is integral to the procurement manager’s role. This KPI tracks and measures the procurement manager’s ability to oversee elements such as procurement inventory levels, control purchasing, deliver to the correct departments, and prevent shrinkage.

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Procurement Officer Objectives

Procurement officer KPIs are performance management tools designed to track and measure the procurement officer’s job efficiencies. Aspects measured include researching and evaluating prospective suppliers, maintaining accurate purchasing and pricing records, maintaining good supplier relations, and negotiating contracts with suppliers beneficial to the company.

  • Maintain accurate purchasing and pricing records – This KPI tracks and measure’s the procurement officer’s ability to maintain accurate purchasing and pricing records. The higher this metric, the greater the extent to which the procurement officer is able to ensure that purchasing and pricing records are accurately maintained over time.
  • Maintain and update supplier information such as company details, contact details, product ranges, and delivery times – This KPI tracks and measures the procurement officer’s ability to maintain and update supplier information such as company details, contact details, product ranges, and delivery times. Secondly, this KPI measures the procurement officer’s ability to keep these records updated and maintained over time.

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  • Maintain good supplier relations – Maintaining good relations with the company’s suppliers is an integral part of the procurement officer’s role. This KPI tracks and measures the extent to which the procurement manager can consistently maintain good relations with suppliers over time.
  • Negotiate contracts with suppliers – Negotiating well-priced contracts with suppliers is an integral part of the procurement officer’s role. This KPI tracks and measures the extent to which the procurement officer is able to negotiate well-priced contracts with suppliers.
  • Research and evaluate prospective suppliers – The ability to research and evaluate prospective suppliers is integral to the procurement officer’s role. This KPI tracks and measures the procurement officer’s ability to analyze and evaluate prospective suppliers. The higher this metric, the greater the officer’s ability to engage with prospective suppliers to improve the company’s procurement capacity.
  • Prepare budgets, cost analyses, and reports – This KPI tracks and measures the procurement officer’s ability to prepare budgets, draw up cost analyses, and prepare departmental and management reports. The higher this metric, the greater the extent to which the procurement officer can prepare the necessary budgets, cost analyses, and reports.
  • Estimate and establish cost parameters for purchases – It is critical that the procurement officer can estimate and establish cost parameters for purchases to ensure that the procurement department remains within budget. This KPI tracks and measures the procurement officer’s ability to evaluate and develop purchasing cost parameters.
  • Develop plans for purchasing equipment, services, and supplies – The development of plans for purchasing equipment, services, and supplies is an integral part of the procurement officer’s role. This KPI tracks and measures the extent to which the procurement officer can develop robust plans to purchase equipment, services, and supplies.

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Procurement Team Objectives

Procurement team KPIs are designed to track and measure the extent to which the procurement team works together to fulfill its role within the organization’s lifecycle. Elements include improving contract compliance, improving the purchase order cycle time, improving procurement ROI, and improving procurement savings.

  • Improve contract compliance – Consistent contract compliance over time is integral to the procurement team’s role. This KPI tracks and measures the extent to which the procurement team is able to maintain contract compliance over time. The higher this metric, the greater the team’s successes.
  • Improve purchase order cycle time – The purchase order cycle time is defined as the time it takes for the purchase order process to complete from inception to the time it is sent to the supplier. This KPI tracks and measures the procurement team’s ability to improve the purchase order cycle time.

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  • Improve procurement ROI – The procurement ROI is defined as the return on investment in relation to the procurement team’s cost of purchases. This KPI tracks and measures the extent to which the procurement team can improve the procurement ROI.
  • Improve total spend per vendor – An integral part of the procurement team’s mandate is to improve or reduce the total spend per vendor. This KPI tracks and measures the extent to which procurement team members can reduce the overall spend per vendor. The higher this metric, the greater the procurement team’s successes.
  • Improve (reduce) maverick spend – Maverick spend is defined as purchases that have not been budgeted for or have not been approved. This KPI is designed to track and measure the procurement team’s ability to reduce the maverick spend figure. The higher this metric, the greater the team’s ability to reduce this figure over time.
  • Improve cost avoidance – Cost avoidance is defined as the ability to not only improve cost reduction metrics but also to reduce the cost of labor associated with the procurement process. This KPI tracks and measures the extent to which the procurement team reduces overall costs by reducing the procurement labor costs.
  • Improve savings – Part of the procurement team’s core role is to continually reduce the cost of purchases and increase savings over time. This KPI tracks and measures the extent to which the procurement team optimizes savings by improving the cost of goods procured.
  • Improve rate of opportunity creation – The rate of opportunity creation is described as the capacity at which the procurement team can operate with current resources. This KPI tracks and measures the extent to which the procurement team is able to operate without increasing the resources required to operate effectively and successfully.
  • Improve supplier time – The supplier time KPI is designed to track and measure the time it takes for the procurement team to onboard a supplier. The higher this metric, the greater the team’s ability to onboard a supplier professionally, quickly, and efficiently.
  • Improve efficiency per employee and group – This KPI tracks and measures the procurement team’s ability to improve its support of the global enterprise. In order to derive this metric, the team must measure the ultimate business outcomes next to regional performance, category, and commodity.

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These procurement KPIs are a fundamental part of ensuring that the procurement team meets its core efficiencies. Procurement plays a vital role in ensuring that the cost of purchasing needed supplies, raw materials, and services does not spiral out of control, costing more than the business makes. Consequently, measuring these objectives is vital to organizational success. They focus on tracking metrics grouped together as the procurement manager, team, and procurement officer result areas.

It is critical to track and measure these objectives because they offer insight into the procurement department’s successes and where improvements are necessary. Metrics like total spend per vendor, cost avoidance, supplier relationships, contract negotiations, the procurement life cycle, and the consistent implementation of procurement best practices determine how effective the company’s purchasing strategies are.

Using procurement manager, officer, and team objectives aim to ensure consistency over time. High performing metrics are valued, translating into an effective procurement strategy and application thereof by the department. Juxtapositionally, low performing metrics must be revisited to ensure that their performance improves over time.

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