Next Level Purchasing - Helping Purchasers Become Indispensable
Home   |   Contact Us   |   Email This Article To A Friend   |  
Photograph of Charles Dominick, SPSM This is the Web-based version of this article. Click here for the printer-friendly version.
  * More Purchasing Articles

10 Procurement KPI's, Part I

PurchTips - Edition # 180

By Charles Dominick, SPSM


How Do You Compare Procurement Performance?

To know how well your organization is performing, you need numeric baselines or points of comparison. The baseline can be your prior years' performance. But it is most helpful if you use the same key performance indicators (KPI's) as other organizations you benchmark with or those published by a research firm, such as:

  1. Cost Savings. This is the aggregate amount of money you've saved by reducing costs from one year to the next. This KPI measures the procurement department's lump sum contribution to the financial success of the organization.
  2. Managed Spend as a Percentage of Total Spend. Total Spend is the amount of money your organization spends externally on products and services each year. It does not include salaries. Managed Spend is the amount of spend that the procurement department controls. This KPI measures the degree of trust that management places in the procurement department's capabilities.
  3. Cost Savings as a Percentage of Managed Spend. This KPI measures how effective the procurement department is with responsibilities it has been given.
  4. Procurement Operating Costs as a Percentage of Managed Spend. Procurement operating costs represent the costs the organization incurs for having a procurement department. The cost components may include pay, benefits, facilities costs, equipment and software costs and more. This KPI measures the procurement department's cost efficiency.
  5. Return on Investment. To calculate return on investment, you must first calculate your "return." In other words, by how much does your cost savings exceed your operating costs? Then, divide that number by the operating costs to determine return on investment. This KPI measures the procurement department's cost effectiveness.

To learn more about Procurement KPI's, considering enrolling the Express Course series Procurement KPI's & Business Acumen.

(keep reading for a FREE Offer)

Spotlight On Professional Development Opportunities

SPSM Certification

Are you tired of not getting enough opportunities, respect, and money out of your purchasing career? Well, guess what? Nothing will change unless you take action towards becoming a world-class purchasing professional.

You see, today's employers refuse to reward employees for yesterday's skills. They demand that purchasing professionals like you use the most modern skills and achieve unprecedented results. They want you to save more money, achieve better operational performance, and reduce risk.

Earning your SPSM® Certification by completing the Senior Professional in Supply Management® Program is the action to take if you want to bring the most modern purchasing   practices into your organization and achieve your career potential. Learn how to earn your SPSM® Certification (and perhaps get an iPod) at:

The Latest Purchasing News


FREE Offer!

How can you test your purchasing knowledge and have a little fun, too? Try our FREE "Million Dollar Savings Game" which is one version of many different games we've added to each of our online classes.

To Try The "Million Dollar Savings Game," Visit: .