Senior Procurement Management are interested in simplicity when it comes to an update with regards to company metrics and why they are needed. Metrics matter because, first of all, you can’t manage what you can’t measure. Management need metrics to better estimate procurement’s contribution to helping achieve desired results and efficacy of spending.
But before you can start measuring activity you need to understand the desired outcome and work from there. You need to link activity to an outcome, in other words what are you trying to achieve and what actions are you going to take to achieve your end goal?
Managing total cost is obviously one of the primary goals of any procurement process. Procurement is not just about money. It is also about measuring effectiveness by looking at the outcomes. There is a saying that if you keep doing the same thing over and over again, you will achieve the same results over and over again, thus if you have to keep spending to achieve the same outcome, your total cost goes up. Overall, these metrics measure how well an organization is applying a variety of leading practices in managing cost such as achieving better prices, managing specifications, managing demand etc.
Managing and entering into agreement with suppliers focusses on the business relationship between an organization and its suppliers. Although getting the best possible deal in the short-term is important, a good relationship in the future may help you get even cheaper prices or other perks. Don’t underestimate the importance of goodwill.
Managing Internal Operations and Customer Satisfaction, efficiency and customer satisfaction is the focus of this metrics area. This includes measuring the procurement cycle time, which begins the moment a company submits a purchase order and ends when the goods are delivered. Internal procurement function costs which include using good suppliers who supply you with quality goods and lower rates, thus keeping cost down, and of course internal customer satisfaction within the procurement function. The way employees treat each other is how they probably treat customers. First of all they are they fundamental asset of an organization, without which an organization can’t run its business. The more you interact with fellow employees the more you become aware of how they can assist you and in turn assist the external customer.
Managing the Workforce, here, the focus will be on acquiring, retaining and developing employees. Procurement is an important service and its success depends on well-trained workforce who deliver that service efficiently, on a daily basis. Every job or task during the procurement process requires a specific set of knowledge and skills. In a perfect world Procurement employees should continually monitor the trends in their environment and within their companies, assess the skill and knowledge requirements for their purchasers, understand the need to involve suppliers in their training efforts and provide quantifiable metrics that can be converted into measurable training goals. It is important to screen through your procurement team and establish who’s skills are on par, who might need some development support and who might just be damaging your brand reputation and would do better in another profession