This infographic shows the Top 10 Metrics to Track for Cost-Effective Procurement, including cost savings, supplier performance, contract compliance, and ROI. By monitoring these key KPIs, your businesses can optimize efficiency, reduce risks, and maximize procurement values.
1. Cost Savings
Measures the total monetary savings achieved through strategic sourcing, negotiations, and process improvements.
2. Cost Avoidance
Tracks expenses prevented by proactive measures like early contract renewals or alternative sourcing.
3. Purchase Price Variance (PPV)
Compares the actual purchase price to the standard or previous price to evaluate cost performance.
4. Supplier Performance Score
Rates suppliers based on quality, timeliness, compliance, and responsiveness.
5. Procurement ROI (Return on Investment)
Calculates the value generated versus the total cost of running procurement operations.
6. Maverick Spend
Measures unapproved or off-contract purchases that can increase costs unnecessarily.
7. Contract Compliance Rate
Monitors adherence to negotiated contract terms, pricing, and service levels.
8. Lead Time Reduction
Tracks the average time from purchase request to delivery to optimize efficiency and reduce holding costs.
9. Inventory Turnover Ratio
Indicates how efficiently inventory is used and replenished, helping reduce storage costs.
10. Supplier Defect Rate
Measures the percentage of products or services that fail to meet quality standards, impacting total costs.
Author’s Bio:
Pankaj Tuteja
Head of Operations – India
https://www.dragonsourcing.com