What is meant by Performance Measurement in Purchasing?
The measurement of procurement performance is part of corporate measurement of success. This includes not only the measurement of procurement cost savings (in terms of cost reductions); arbitrary key figures in purchasing, which were defined by management as goals to be obtained (e.g. on a scorecard/balanced scorecard/procurement scorecard) and whose achievement is to be measured based on actual figures (ideally automated) are also included.
There are different synonyms for the term measure of success, such as:
There are typically at least three different types of successes in regard to performance measurements in purchasing:
In principle, any target value or KPI can be measured by means of key figures that can be defined as successful. In purchasing it is common and useful, for example, to define and thereby measure improvements to non-monetary key figures such as the Maverick Buying Quote (compliance) or the number of suppliers, or to use KPIs in regards to quality and supply capability.
The measurement itself is carried out via highly specialized procurement performance management systems such as SpendControl from Orpheus. In addition to containing savings and spend analytics, these systems also consist of numerous reports and KPIs for the ongoing and automated measurement of purchasing successes. The procurement controlling department is responsible for performance measurement, thereby making it a functional part of strategic purchasing.
In this sense, performance measurement is also a connection between the purchasing and the finance department. The coordination between the two functional areas takes place via planned corporate goals. These are broken down into purchasing objectives using a procurement scorecard, for example, so their admission and degree of achievement can be measured. A study published by Orpheus and EY pertaining to the coordination of the CPO and CFO domains, as well as in regard to performance measurement in purchasing can be downloaded using the following link: Procurement Performance Management today
With its standardized ERP interfaces you can connect the spend cube of SpendControl within a short time frame to any ERP system (e.g. SAP, Navision, Oracle etc.).
Read blog articles about spend management, initiative management and data management in procurement, or other articles from our experts.