Balanced Scorecard, Procurement Planning and Initiative management in strategic procurement
The definition and elaboration of details for company goals (Targets) are often done via Balanced Scorecards. Balanced scorecards usually exist for the entire company (meaning: the executive board plans revenues and earnings) as well as for individual functional areas.
The procurement department, for example, defines targets based on KPIs like savings - based on the purchasing volumes (as cost reduction) - in their procurement scorecard...
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... Furthermore, KPIs such as improvements of liquidity by increasing of DPO as well as needs-based delivery reliability can be added to the procurement scorecard.
Not only procurement or rather supply chain management are governed by balanced scorecards, suppliers can also be assigned targets via a so-called supplier scorecard. Supplier scorecard targets may be price improvements as well as goals regarding quality, delivery, and availability.
In a balanced scorecard, companies define and plan (often collaboratively) desired overall objectives as well as subgoals (targets), distribute them to organizational units/employees, managers or suppliers and “hope” that they are actually implemented as planned.
This whitepaper depicts how Balance Scorecard, Procurement Planning, and Initiative management interact with each other to establish a modern and integrated procurement controlling within the entire company.