Over on Supply Excellence, Tim Minahan has started a good discussion about how procurement performance should be measured. At the conclusion of his post, Tim notes that procurement organizations need to be "equally competent at selling as they are at sourcing. And, as every good salesman knows, success requires you to align your solution or service to support what the customer needs." But what are the best KPIs to measure an organization on? And how best to track and report on them? In my experience the concept of savings or ROI is somewhat nebulous (though Hackett has done a solid job defining procurement ROI in its benchmarks). For example, because my steel costs have gone down does that mean I've exceeded a performance target? Maybe. Or maybe not. In fact, that type of question is irrelevant in measuring performance. What matters are objective yardsticks. For example, how much have I beaten the market by? Or what quantifiable risks have we avoided as a result of our actions. If you're curious about the subject of measuring procurement performance and what KPIs matter, Tim has some good ideas, as do the folks who've chimed in with comments. Check it out.
- Jason Busch