1. Price metrics
To understand if the organization is paying different prices for a similar product or service across its business units and geographies. This is a common problem as business units/geographies often do not share data and best practices . The analysis can be performed at the following levels:
- Price variation for a SKU , where the same SKU can be purchased in different price variations from different suppliers.
- Pricing variation by business unit/geography , where the same SKU can be purchased at different price variations within different divisions and geographies.
- Spend/Price Development , to evaluate whether an increase in spend for a SKU/category is resulting in a reduction in unit cost.
2. Financial metrics
To understand how working capital can be optimized using payment terms as a key lever. Another important element is to control over-budget spending by comparing the budget or purchase order value with actual billing.
Some analyzes that can provide knowledge about this are:
- Visibility and optimization of payment terms to release working capital by comparing categories/geographies to external and internal benchmarks.
- Incoterms can be analyzed to identify profitable transformation opportunities.
- Invoice processing costs should be minimal and analyzed using a number of transactions per supplier and the average invoice value.
- The quote/purchase order and billing must be synchronized to determine the difference between the quotes/purchase order and actual invoices.
3. Compliance metrics
It allows you to understand the variations of the defined process and the agreed KPIs. These usually cannot be completely avoided, but must be controlled, since the materialization of risks always comes with a higher price . Ideal metrics to explore include:
- Spending from non-approved and non-preferred suppliers.
- Maverick spending as a percentage of total spending.
- Expenses without contract and without purchase order.
- Fraud detection by analyzing factors including expenses close to approval limits and large expenses without purchase orders.
4. Supplier base metrics
It serves to understand the performance of the existing supplier base and identify opportunities to consolidate it further, for example using more global contracts to secure better prices. Procurement teams should consider the following analyses
- Supplier performance metrics to measure current performance against the SLAs and KPIs agreed upon in the contract.
- Supplier base accumulation , to understand which geography/division has a high supplier base built over years, compared to recorded spend.
- Leverage existing vendors’ product/service offering to cover multiple categories.
5 Métricas de CPO
To understand the overall sourcing performance and efficiency of the Purchasing team at the CPO or leadership team level:
- Acquisition cost per supplier
- Acquisition cost as % of revenue
- % Spend Under Management
- % Suppliers Under Managment
- % categories/materials from a single source
