BlogImprove your Procurement KPIs

Improve your Procurement KPIs

Gayatri on December 05, 2019

More and more organizations are realising the value in proper procurement systems. As a result, they are constantly looking for means to improve their procurement processes and let it drive value beyond time and cost savings. Teams want to back their decisions with the right data and information which has given rise to keeping track of procurement KPIs. While these may not be abuzz but most businesses have already established procurement KPIs that they want to monitor over time to make better decisions. 

 

What are procurement KPIs and Why you should measure them?

Procurement KPIs are the values tracking all relevant aspects of purchasing of goods and services from a vendor. These enable procurement teams to control and optimize their quantity, quality, costs, timing and sourcing of purchasing and keeping pace with overall process goals, procurement strategies and business objectives. While most organizations are accustomed to using KPIs that focus primarily on cost savings, here we have certain KPIs that procurement leaders have recognized to increase revenues, drive innovations and improve customer service.

 

KPIs every procurement team should add to their strategy

While these may not be set in stone, we have identified these KPIs that are helping procurement teams set up the right professional goals.

 

  1. Cost to perform the procurement process
  2. Cycle time in hours to place PO
  3. Percentage of POs approved electronically
  4. Compliance rate
  5. Vendor availability/reliability 

 

These KPIs broadly cover the three key areas in procurement: cost, time and compliance.

All three categories are interdependent and can be classified in more than one ways.

 

  1. Cost to perform the procurement process This comprises of personnel involved, systems in place, overheads, outsourced functions, and other costs. These costs also include sourcing strategies, selecting suppliers, ordering materials, and helping to develop and nurture supplier relations. These can be measured by normalizing all metrics and making data easily comparable. an APQC survey shows that organization that do not automate procurement end up spending at least $10 or more per invoice.
  2. Cycle time in hours to place POs POs can take anywhere from 5 to 48 hours to be placed. with the speed and efficiency becoming critical in all organization, it is intuitive that time will always be important in procurement.
  3. Number of POs approved electronically Traditional methods such as spreadsheets and paper are no longer scalable. Using paper purchase orders can significantly delay and lengthen cycle time. with digitization becoming a requirement in all growing organizations, it would be fitting to measure the number of POs approved electronically.
  4. Compliance rate Contractual compliances and policies are central to ensuring legal securities. A legally sound purchasing contract with all penalties clearly defined can improve compliance rate that can be measured as a ratio of disputed invoices to total invoices.
  5. Vendor availability This is used to measure the vendor’s capacity to respond to emergency demands, bulk requirements, etc. It helps to establish the extent of reliability they can place on the vendor. This can be measured by a % ratio of the number of times vendor could supply to the number of orders placed with the supplier. 

 

How an eProcurement system can help you improve your KPIs

To step up your procurement, you need to take KPI measurement and tracking digital. Cloud-based solutions can help collect data, segregate it, route it to key stakeholders, retrieve when required and a lot more. The digitized approach will allow the procurement team to dedicate more time in analyzing the data and optimizing the process rather than in manual tasks that can be digitized.

 

 

Setting up a digital procurement system can help you:

 

  • Drastically reduce time to process with no paperwork and email trails to rely on you can cut back on time spent in the processing of requests because of time spent in looking for supporting documents and pending approvals.
  • More time to be productive when the team is free from tedious manual tasks, they will get more time to be more productive towards their goals and optimize their jobs. They are free to spend time on activities that need actual human involvement. Automated procurement software sends the relevant notifications to all the stakeholders, and mobile support means that things approvals don’t have to wait indefinitely in email inboxes.
  • Increased speed and efficiency Automated procurement system will take care of requests reaching the right approvers and notifications delivered to all stakeholders on their mobile device that means less dependency on email inboxes or physical presence in the office.
  • Reduced errors Record and store data accurately along with automation for three-way matching for automatic invoice approvals to compare POs against invoices and requests with no scope for manual error during data entry.
  • Insights into purchasing Obtain actionable insights with all the information you need in the form of reports and obtain a top-level to granular level view. Easily identify inventory levels, pending requests, on-going requests, bottlenecks and take decisions proactively.
  • Policy compliance With task-based apps for individual procurement processes, tasks get carried out in adherence with your organization’s procurement policies with rule-based data entry and storing. As each step can be governed there is little to no scope for employees to not stick with the guidance provided.

Digitizing and monitoring procurement KPIs with DronaHQ

With DronaHQ, organizations get access to one comprehensive tool that will enable them to handle their procurement processes effortlessly. Being a SaaS-based tool, the outcome is all your data made available to you, anytime, anywhere, even without internet connectivity.

 

With all the information at your fingertips, measuring and tracking KPIs becomes effortless. From purchase requisition and purchase order approvals to receiving of goods and clearing of invoices- all the data is connected and made available to key stakeholders.

 

Enterprises have built apps using No Code Platform DronaHQ in 24 hours to manage vendor relations, spend control and approval workflows within the procurement department without a dependency on their IT or worrying about security courtesy the platform’s ISO 27001 compliance.

 

Current enterprise system lack connectivity. The information generated does not speak the same language. Leveraging no-code platform DronaHQ you can make unified dashboard apps that integrate seamlessly with all enterprise systems to give your data a uniform look without any coding required.

 

With the right procurement apps set-up, KPI tracking will get easier than ever. Create process-specific apps that automatically collect, store and analyze information the way you tell them to with minimal human efforts required. Using workflows in DronaHQ you can automate reminders and notifications to key stakeholders to keep track of processes, giving procurement leaders increased ability to take proactive actions where required in addition to creating custom reports on the metrics they wish to measure such as PO cycle hours, procurement ROI, vendor defects and more.

 

Procurement KPIs can be different for different organizations. They may not always be clear-cut as one might like them to be. But with the time taken into setting up of an ideal procurement system, procurement leaders can design the system in such a manner that all information collected can speak in numbers that can be measured allowing the processes to be tracked and improved where required. 

An on-the-go, cloud-based solution to procurement processes not only means instant savings on cost and time but also foreseeing proactively into the processes by measuring the right KPIs and gaining actionable insights from the data. 

 

If you want to explore how you can improve your procurement processes and in turn have a positive impact on your KPIs, Sign up for a free trial or book a demo with DronaHQ and witness how you can track all the metrics that matter.