In the first two parts of this KPI series, we highlighted some of the foundational measurements for procurement pros and the problems of traditional procurement key performance indicators in terms of how they can be incomplete, misleading and even damaging to a value chain transformation. In fact, one of the easiest ways to assess an organization’s buy-side sophistication is to review its portfolio of metrics. If all you see is a myopic focus on low operating expense and a high focus on year-on-year cost savings, then you know the organization isn’t taking a holistic approach that maximizes enterprise value.
So how do you get from tactical procurement metrics to more powerful spend/supply measures that help build new capabilities and favorably impact critical business outcomes?
In the previous installment of this series, we mentioned some of the more expansive sets of metrics that organizations use to measure:
- Spend/cost management and savings
- Supplier/supply performance
- S2P process metrics for process performance (e.g., labor efficiency, cycle time, error rates, etc.)
- Underlying capabilities in talent management, digital, etc.
- Stakeholder-specific metrics related to their spend, their business objectives, their view into supply/supplier performance, and their assessment of procurement value add
In this final installment, we’ll dive a little deeper into the metrics (and cover 18 of the most important ones), but also use the metrics as a way to align various processes and stakeholders to accelerate a transformation. As part of this, we’ll provide a little more precision to the management concepts below so that they can be aligned and accelerated:
- Value Management (and Performance Management)
- Financial / Budget Management
- Demand Management
- Cost Management
- Savings Management
- Service Management
- Stakeholder Management
- Spend Management
- Supply Management
- Process Management (e.g., S2P management)
- Procurement Management
- Category Management
- Sourcing Management
- Supplier Management (or “Third Party Management” more broadly)
- Contract Management and “Commercial Value Management”
- Performance Management
- Capability Management
- Transformation Management
Finally, we’ll share a graphical performance management framework that will bring these concepts together and help you improve your performance management capabilities so that you stay aligned and focused on what’s truly important across the value chain.
OK, let’s get to it!