KPIs are indicators that allow us to measure the results of specific areas or processes. In this way, they allow better control, monitoring and optimization of strategies, as well as acting in time to achieve the expected results in the area, minimizing risk.
The supply area, being a strategic part of any organization, must closely follow certain indicators to optimize its management and resources. We tell you some KPIs that you should take into account to measure the management of your area.
1. Compliance Rate
This indicator allows us to know which suppliers comply with the basic agreements established with the organization. This compliance rate can be evidenced in the reaction time to problems presented with the product or service, the delivery time of a good or the implementation of a contracted service.
In this way, you can find which suppliers comply with the SLAs, in which negotiations deviations occur, or which processes are increasing indirect expenses due to a low compliance rate.
2. Purchase Order Cycle Time
This supply KPI allows us to know how agile organizations are in placing a purchase order (PO). This is achieved by measuring the process in hours or days from the moment the requisition is sent until it is hired. It is important to remember that this indicator does not include a measurement until the delivery of the good or service.
This indicator allows us to identify points of improvement in the team’s productivity to make the Supply Chain more agile and effective.
3. Lead Time
This KPI seeks to measure the total time required to complete a purchase order, that is, from the moment the request is generated until the supplier delivers to the organization. Typically, this measurement is done in days.
It is important that the Supply area establishes expected delivery times and monitors whether suppliers comply with these times. This will help you take corrective actions, find the most efficient suppliers (especially if an urgent purchase is required) and improve future negotiations with suppliers.
4. Cost savings
This KPI helps identify the tangible savings that the Procurement team has achieved through negotiations, discounts achieved and other strategies related to its management.
This metric allows you to demonstrate effective practices, increase team efficiency, find new ways to optimize processes and create a long-term cost reduction strategy.
Continuous process improvement is key for Supply areas, so the first step is to identify and understand the most important indicators to make decisions that seek to have a more agile, efficient and strategic area within organizations.
