Electronic procurement metrics measure procurement process efficiency

Shridhar Taparia
Jun 29, 2022·4 min

Digitization solutions are implemented everywhere, and procurement management is no exception. Are you considering implementing a procurement solution but worried about the delivered value? Let us put you at ease by explaining the procurement KPIs (key performance indicators) that measure the effectiveness and performance of your procurement process. We know these KPIs are useful in mitigating procurement risks, improving cost savings, and streamlining the procurement workflows.

Key Electronic procurement Metrics For Business Success

Efficient organizations leverage procurement data to develop innovative business ideas. Enhancing supplier relationships will reduce procurement costs, which contributes to about 70% of organizational spending. We categorize procurement KPIs into 5 broad categories:

Cost Savings Metrics

In the Assessment of Excellence in Procurement study conducted by Kearney, 100% of the participants have agreed that price reduction through negotiations and sourcing is a key driver of business strategies. The procurement solution you use should reduce the total cost of ownership (TCO). TCO views the procurement process from a higher perspective and is useful in comparing multiple sourcing options.

Supplier Performance Metrics

Improving supplier performance is essential for procurement success. The e-procurement process supports onboarding suppliers for a hassle-free vendor-supplier relationship. By increasing vendor competition, the procurement solutionimproves the quality of service, eliminates risks, and ensures compliance. It also minimizes disruptions and improves supplier accountability. Traditionally, the number of suppliers is limited mainly because it is difficult to manage overlaps. The automated procurement system promotes diversity and creates market demands by increasing the number of suppliers because automated supplier relationship management is now possible.

Spending Management Metrics

Your organization must monitor the spending percentage actively moving through the procurement process. Some of the spendings will inevitably be out of control.Electronic procurement software will help you identify more saving opportunities with better sourcing. We suggest you aim for 80% of spending under management. Maverick spending should be eliminated wherever possible, and an automation platform enables transparency to aid in eliminating these risks.

Procurement Operation Metrics

Procurement needs continue to increase across multiple sectors. According to World Bank, $11 trillion was spent on public procurement. With so much investment in procurement, it makes sense for a business to measure whether their procurement efforts result in value. The procurement Return on Investment (ROI) is a key metric that directly measures delivered business value. A procurement solution reduces the time taken to finalize a procurement contract, which speeds up the time to market. The payment accuracy, the time taken for sourcing and negotiation, PO cycle time, etc., provide valuable data about the procurement process efficiency.

Many enterprises measure employee-related metrics in the procurement process to measure employee performance for reward-based programs. Quantifying human efforts and behavior is often difficult, but the transparency offered by electronic procurement software makes it possible. Spend under management per employee, cost savings per employee, contract negotiations per employee, customer satisfaction metrics per employee, etc., are all provided by the automated solution. These data insights help your enterprise identify and recognize key talents in the procurement team.  

How Can Procurement Software Data Analytics Empower Your Business?

With billions spent in procurement annually, it makes sense for businesses to collect procurement data and derive analytics. The electronic procurement system makes it possible to collect these analytics and visualize data to enable better business decisions. Actionable business insights are key to procurement optimization. The AI-powered solutions now allow the incorporation of complex data science technologies to develop data insights.

Older legacy systems must be replaced with newer digital solutions to improve business efficiency because advanced procurement metrics are the need of the hour. Deloitte survey shows that Chief Procurement Officers (CPO) now pay more attention to procurement analytics that impacts businesses. Procurement analytics are not limited to spend analysis. They are also essential to ensure sustainable and social responsibility because the world is moving towards a greener supply chain management system. The procurement software can pull data from external and internal data assets to custom-create procurement analytics that are essential to your business. With the analytics mentioned above, electronic procurement management can help you forecast future performance to increase cash flow.  

Procol has helped India’s $3 billion+ manufacturing company achieve 8.5% savings immediately after implementing our automation procurement software. Do you want to achieve similar cost savings and streamline the procurement process? Contact us for a free demo and allow us to eliminate procurement risks in your business.

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