What are the best procurement metrics to benchmark against?

Improving on SUM can benefit the business to better deliver category strategies and have control over supplier relationship management. In my experience, an analysis on previous financial statements and identifying those months with good results can also provide some insight on setting benchmarks.

One time at work, I was consulting with a company that their SUM was around 30%. This meant that a large portion of their spending was unmanaged by their procurement team. The reason was a lack of centralized purchasing control. Different departments had autonomy over their spending, resulting in fragmented supplier relationships and missed opportunities for volume discounts. To address this, we established clear procurement policies and guidelines to ensure compliance and streamline purchasing processes. Moreover, we conducted supplier rationalization exercises to consolidate spending with strategic suppliers. For this company, benchmarking against industry standards was instrumental in setting a target SUM of 70% within a year.

- Innovation : let's see our procurement teams as true innovators for the business. - revenue generation: cost savings will always remain but what about revenue generation for the business? - NPS: what is our stakeholders view?

Higher spend under management typically leads to better negotiation power, increased efficiency, and improved visibility into the organization’s spending patterns.

The importance of procurement metrics varies based on the priorities & objectives of a mfg. org. However, if I had to pinpoint one overarching metric, it would likely be Cost Savings. It directly impacts the bottom line by reducing expenses & increasing profitability. Cost savings can encompass various strategies, including bulk purchasing, supplier consolidation, & strategic sourcing. That said, while cost savings are crucial, they shouldn't be the sole focus. A well-rounded approach considering factors like supplier performance, quality, risk management, and efficiency can provide a more comprehensive view of procurement effectiveness. It's about balancing cost savings with other critical aspects to ensure overall operational excellence.

As a purchaser my job to benchmark market prices becomes very easy if I were to compare the prices of the product with those manufactured in china. This spirals the purchaser towards shutting eyes on India. The spirit of effective savings is in hands when you understand demand (highly volatile city to city), hierarchy of the product in eyes of the consumer and finally the channels of emphathy worthy obligators available to supply such demands. This definitely is the butt of work required in modern times to achieve your perfect savings thereafter rewarding fair margins to the obligators. A healthy ecosystem is created and in your job as a purchaser you get the happiness first!

One time the procurement team had successfully securing what seemed like substantial cost reductions. However, upon closer examination, these savings weren't realized because price reductions were offset by changes in product specifications, resulting in limited actual savings. In my experience, savings realized requires a holistic approach. It's not merely about negotiating lower prices but but include optimizing supplier relationships, improving contract terms, reducing total cost of ownership, and enhancing efficiency in the supply chain. To address this challenge, we incorporated a comprehensive Total Cost of Ownership (TCO) analysis including maintenance costs, operational efficiency, and quality improvements.

Estruturar uma linha base de custos, considerando históricos de pre?os, cota??es de mercado pode ser uma boa sacada para analisar a evolu??o dos custos. Estabelecer indicadores robustos de Saving e Cost Avoidance é sem dúvidas o caminho para boa gest?o de economia realizada pelo pessoal de compras.

Saving realised is efficient only if it is done through an analytical analysis of longitivity, durability and Negotiation on prices on efficient product and lesser maintenance need on sourced kine items measures implemented in procurement impacts on larger volume tk Savings realised with Negotiation,OEM(Original manufacturer associations and eradicating the middle business lines of the material and to purchase the materials directly through manufacturer to enhance warranty and service against deliveries

To calculate and track procurement savings, there needs to be a baseline current spend level with a supplier. Once this number has been calculated, the next step would be to subtract both cost reduction and cost avoidance.

It is important that as a vendor you are maintaining good supplier relationships by keeping your end of the bargain. Meeting your obligations from contracts agreed on by observing terms and conditions such as paying invoices on time; honoring the contract agreement as it relates to marketing (if a part of the terms).

In a previous role, a company struggled with supplier performance issues, quality discrepancies, and frequent disputes related to deliverables and timelines. In addressing this issue, Internal audits were conducted regularly to assess adherence to contractual terms and identify areas of improvement. Additionally, supplier scorecards were introduced to track and measure supplier performance against predefined key performance indicators (KPIs). Moreover, we focused on fostering transparent and collaborative relationships with suppliers. This involved frequent communication, establishing clear lines of communication for issue resolution, and regular performance reviews to ensure alignment with contractual obligations

Gest?o de contratos é elementar e extremamente necessária para controlar vigência, além de outros atributos contratuais, n?o deixando de lado a gest?o sobre desempenho de entrega, qualidade e demais controles para garantir nível de excelência dos fornecedores.

Contract compliance is a must for an organisation to reduce dispute and unnecessary involvement in compliance agency requirement fulfilment, also the risk factors governed by a good contract compliance rate is limited by a higher contract compliance rate. Risk and Audits by third party as they would be letting us know the exact situation at regular intervals control and enhance a good contract compliance rate

Contract compliance refers to observance of the norms and procedures outlined in a contract. Often, this involves periodic reviews of an existing contract to determine adherence to compliance mandates and protocols and check for deviations.

In a past role, a company's procurement function struggled with maintaining a positive rapport with its suppliers resulted in delayed deliveries, quality issues, and limited supplier collaboration on innovative solutions. To address this, we introduced regular feedback sessions with key suppliers to understand their perspectives, concerns, and areas for improvement. The story emphasizes the significance of supplier satisfaction in procurement and how it directly impacts the quality of supplier relationships. By implementing proactive communication, feedback mechanisms, and utilizing external benchmarks, companies can elevate supplier satisfaction, fostering stronger partnerships that contribute to mutual success and innovation.

Reconhecer o desempenho dos fornecedores é essencial, seja enviando scorecards mensais com as taxas de desempenho por período, seja reconhecimento via premia??es em workshop entre categorias de fornecedores, etc. O importante é ter proximidade e uma rela??o de confian?a e respeito mútuo entre fornecedores e clientes.

Supplier satisfaction is a must for good collaborative effort to enhance good Governance model. Paying in time, PO before start of work, helping in dispute resolution, listening to the suppliers suggestions to improve industry benchmarking and ability to make them feel safe while doing business with a procurement team helps in bettering negotiation powers and intern helps in achieving optimum supplier satisfactions

This paper aims to explore the construct of supplier satisfaction as a factor of buyer–supplier relationship quality. Supplier satisfaction is defined as a supplier's feeling of fairness with regard to buyer's incentives and supplier's contributions within an industrial buyer–seller relationship.

In a previous role, Sourcing, contracting, and ordering activities took an extensive amount of time, leading to delays in meeting operational demands. Upon analysis, there were manual approval processes, redundant paperwork, and a lack of standardized procedures, contributing to the elongated cycle times. To address this challenge, the company initiated a comprehensive review of their procurement workflows. Process mapping was utilized to identify inefficiencies and areas where time could be saved. This involved streamlining approval hierarchies, implementing automation where possible, and standardizing procedures to expedite processes. Regular performance reviews were conducted to track cycle times and identify any deviations.

Below are some of the cycle time reference points which can be used for evaluating and optimizing your procurement operations. Requisition to Purchase Order (PO) Cycle Time: 1. Catalog Base Purchases: 2 - 6 business days 2. Non-Catalog Base Purchases: 6 - 15 business Contract Execution Cycle Time: 1. Standard Template, Low Complexity: 3 - 4 business days 2. Standard Template, Medium Complexity: 7 - 8 business days 3. Non-Standard Template, Low Complexity: 10 - 14 business days 4. Non-Standard Template, Medium Complexity: 1 - 2 months 5. Non-Standard Template, High Complexity: 3 - 4 months Sourcing Cycle Time: 1. Tactical: 1 - 5 days 2. Low Complexity: 7 - 16 days 3. Medium Complexity: 20 - 40 days 4. High Complexity: 30 - 65 days

When you're working in a company with ton of sugar need every week, this cycle time is most important to running a business... So keep your timeline up ??

Cycle time is the amount of actual time to start the PR to PO and delivery and inturn payment release to supplier. Cycle starts with sharing proper and clear requirement with expectations properly intimation to supplier, than taking the OEM quotes or wholesaler or warehouses prices negotiated basis good negotiation skills and after ordering the PR to PO processing must be quick and supplier must be kept informed at all stages to achieve engagement interest and interest in business and supply management improvement scope.

According to the Association of Procurement Professionals, a procurement process can take anywhere from a few weeks to several months. Factors that can influence how long a procurement process takes include the size and complexity of the purchase, the number of suppliers involved, and the bidding process itself.

In a previous role, I worked with a company that lacks comprehensive view of their spending patterns, and faced challenges in identifying cost-saving opportunities and leveraging their purchasing power effectively. To address this issue, the company established data quality metrics to benchmark the accuracy and completeness of their spend analysis. Regular audits and reviews of the spend analysis processes were conducted to identify areas for refinement and optimization. Utilizing advanced analytical tools, establishing data quality metrics, benchmarking against industry standards, and embracing a culture of continuous improvement are crucial strategies to enhance the effectiveness of spend analysis.

Many companies overlook measuring the effectiveness of their spend analysis process. Below are the things you should track- Consolidation of Spend through different data sources and integrate vertically and horizontally Assess capability to analyze foreign language data Ensure consistent Data Harmonisation across diverse data sources Maintain consistency in Supplier Normalisation and Grouping Accurately categorize transactions and incorporate manager feedback Monitor utilisation by Sourcing Teams Evaluate tool effectiveness in identifying savings

One aspect that's incredibly vital in the realm of procurement metrics is the integration of sustainability and ethical considerations into the evaluation framework. This involves evaluating suppliers on considering their environmental policies, ethical practices, and social responsibility initiatives. For instance, I worked with a company that revamped its supplier selection criteria to prioritize suppliers with sustainable sourcing practices and a commitment to reducing their carbon footprint. Relationship management often play a crucial role, I recall a situation where a negotiation stalled because of a breakdown in communication. Leveraging AI-powered predictive analytics to forecast demand and optimize inventory levels is important

As a user, I need from procurement team to understand the requirement and the innovation they want to do in price, they must discuss with user..

1. Quality Compliances 100% 2. PR to PO Cycle Time 3. Cost Reduction Initiative Further monitoring supply chain, encourage local supplier or MSME also indicates the procurement efficiency

Measuring efficiency in the entire procurement process end to end from RFQ to final delivery and clearing the last invoice from supplier for a given procurement transaction shall be benchmarked This may include digitalization adherence to compliance transparency,supplier collaboration how supplier resolves an issue supplier risk management supplier audits and supplier adherence to contract terms and conditions