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How do you set realistic and achievable targets for your purchasing performance?

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Setting realistic and achievable targets for your purchasing performance is crucial for optimizing your costs, quality, and delivery. However, it can be challenging to define and measure the right metrics, align them with your business goals, and adjust them to changing market conditions. In this article, you will learn how to use a simple and effective framework to set and monitor your purchasing performance targets.

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Oseghale Okohue BEngr. Msc. MBA. DBA. Prince2?Practitioner

Accredited NEC4 ECC Project Manager & Snr. P6 Planner | EPICM, Offshore Engineering, Renewable Energy (HVDC & HVAC…
Dylan Martin

Procurement Consultant | [DISC??] | Artificial Intelligence & Cultural Intelligence | Exploring the Future of…
Wadad LAHAD

Purchasing Manager (CIPM - CIPP) & CIPP, CIPM & CISCM Trainer - Strategic Sourcing Expert / Vendor Management /…

1 SMART criteria

The first step to set realistic and achievable targets is to use the SMART criteria, which stands for Specific, Measurable, Achievable, Relevant, and Time-bound. This means that your targets should be clear and well-defined, quantifiable and verifiable, realistic and attainable, aligned with your strategic objectives, and set within a specific timeframe. For example, a SMART target could be to reduce the average lead time of your suppliers by 10% in the next six months.

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Dylan Martin

Procurement Consultant | [DISC??] | Artificial Intelligence & Cultural Intelligence | Exploring the Future of Procurement & Supply Chain | Reach out anytime ??
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Setting SMART goals is vital for measuring and achieving success in purchasing performance. You must define clear objectives. For instance, instead of saying “reduce costs,” say ''reduce the annual spending on office supplies by 10% by the end of the fiscal year.'' Set quarterly milestones to monitor progress, aiming for a 2.5% reduction each quarter to meet the annual target.

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2 KPIs and benchmarks

The second step to set realistic and achievable targets is to identify and track the key performance indicators (KPIs) that reflect your purchasing performance. KPIs are measurable values that show how well you are achieving your targets. Some common KPIs for purchasing are total cost of ownership, supplier quality, on-time delivery, inventory turnover, and supplier relationship management. To set realistic and achievable targets, you need to compare your current KPIs with industry standards, best practices, or historical data. This will help you identify your gaps, strengths, and opportunities for improvement.

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3 Feedback and review

The third step to set realistic and achievable targets is to collect and analyze feedback from your stakeholders, such as customers, suppliers, managers, and employees. Feedback is essential for evaluating your purchasing performance, identifying issues and risks, and finding solutions and best practices. You should solicit feedback regularly and systematically, using methods such as surveys, interviews, audits, or reports. You should also review your targets periodically and adjust them if necessary, based on the feedback and the changing market conditions.

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Wadad LAHAD

Purchasing Manager (CIPM - CIPP) & CIPP, CIPM & CISCM Trainer - Strategic Sourcing Expert / Vendor Management / Contract Negotiation / Product Development / Cost Reduction
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Analyzing historical data to comprehend current performance levels and find areas for improvement is the first step towards setting reasonable and attainable goals for purchase performance. Set definite goals that are in line with the corporate objectives and current market trends. To successfully track progress, implement small goals to be measurable with clear deadlines.

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4 Communication and recognition

The fourth step to set realistic and achievable targets is to communicate them clearly and effectively to your team and other stakeholders. Communication is vital for ensuring alignment, commitment, and accountability. You should communicate your targets using simple and concise language, visual aids, and relevant examples. You should also explain the rationale, benefits, and challenges of your targets, and how they contribute to the overall business goals. Moreover, you should recognize and reward your team and other stakeholders for their achievements and contributions to your purchasing performance.

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5 Continuous improvement

The fifth step to set realistic and achievable targets is to adopt a continuous improvement mindset and culture. Continuous improvement is the process of constantly seeking ways to enhance your purchasing performance, by learning from your successes and failures, implementing best practices, and innovating new solutions. You should encourage your team and other stakeholders to embrace continuous improvement, by providing them with training, resources, and support. You should also monitor and measure your progress and results, using tools such as dashboards, scorecards, or reports.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Oseghale Okohue BEngr. Msc. MBA. DBA. Prince2?Practitioner

Accredited NEC4 ECC Project Manager & Snr. P6 Planner | EPICM, Offshore Engineering, Renewable Energy (HVDC & HVAC Power Cables, Wind, Solar, BESS, Grid Code Compliance (G99, G5/5, P28) & Integration)
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Setting realistic and achievable purchasing performance targets involves analyzing historical data, market trends, and stakeholder input. For renewable energy projects like offshore wind, targets may include cost reduction in turbine procurement while maintaining quality standards. Grid code compliance studies aim for timely completion within budget constraints. Manufacturing targets focus on optimizing supplier relationships and streamlining procurement processes. Battery storage projects prioritize targets related to technology advancement and cost-efficiency. Setting targets aligned with project objectives ensures successful purchasing performance.

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How do you set realistic and achievable targets for your purchasing performance?

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1 SMART criteria

2 KPIs and benchmarks

3 Feedback and review

4 Communication and recognition

5 Continuous improvement

6 Here’s what else to consider

Purchasing Processes

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