5 Transformative Procurement Key Performance Indicators (KPI’s)

Strategic Reasons for Key Performance Indicators (KPI’s)

Amongst all the Chief Procurement Officers (CPO’s) The Innovation Garage collaborates, we’ve curated and present here some of the most common Key Performance Indicators (KPI’s) for supply chain and procurement success.

These KPI’s are becoming of more significance as CPO’s look to identify how their procurement teams drive value for the enterprise.

Strategically, there is a long term objective. It is a long-term transition of organizational mindset. At the highest level, the most successful leaders are looking to shift mindset. Moving from buyer-planner-expediter, to strategic-sourcing, then to a solution-sourcing and innovation delivery mindset.

What are the Five (5) Transformative Key Performance Indicators?

The KPI’s represent five (5) key building blocks migrating from basic tactical to advanced strategic thinking.

1. Basic Tactical – Supplier Delivery and Quality Performance.
   • Direct Material Spend
     • Look to Advanced Shipping Notices (ASN’s) tracking to Dock Date.
     • Simply Quality first yield measures.
     • Aggregate PPM Performance of the Supply Chain
   • Indirect Procurement Spend
     • Adherence to Service Level Agreement (SLA) Commitments
     • Supplier Aggregate PPM Performance…Direct Suppliers providing components and quality level
2. Intermediate Tactical – Monitoring of spend under contract.
   • Segmenting spend for the items that are under contract.
   • Sift and sort by high value to low value.
   • Attack the high value items for optimization opportunities.
3. Advanced Tactical – Establish Bottom Line Savings Impact –
   • Cost Savings, or Avoidance, Rebates, Life Cycle Savings.
4. Basic Strategic
   • Supplier Risk Scores – Identify what supplier is most at risk in the ecosystem, and what is the plan to solve the risk.
5. Advanced Strategic
   • Supplier Enabled Innovation™
     • A formalized strategy and active program across the enterprise for long term growth.
   • Open Innovation Value Chain
     • Mapping the value chain delivery of the supply base across the enterprise.

Working intentionally and one at a time, using the five (5) KPI’s above present focused and concrete steps for your organizations path to success.

Ready to Learn More and Explore Next Steps to Build and Amplify the Ideal Procurement Operating Model?

Reach out to us to discuss a procurement and supply chain strategy focused on value, collaboration, Net Margin AND cost savings. If that sounds really disruptive to the status quo, it is.

At The Innovation Garage®, We help organizations grow. Providing education, tools, technology, and expert consulting in change management for strategy, innovation, and supply chain. Guiding leaders from organizations across the world to intentionally self-disrupt their offerings and organizations. We deliver world-class education, tools, and technology on how to craft business operating systems focused on long-term profitable growth. 

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