15 procurement performance metrics
to get your business moving

You’ve relied on the same procurement procedure for years, accumulating plenty of data. But do you know which processes are thriving and which are flagging?

If you haven’t updated the way your company manages procurement for a while, your business could be plateauing—no remarkable decline, but no growth either. 

Or, even worse, your manual procurement policy could be leaking costs and shutting its eyes to value-driven opportunities.

How can you optimize procurement to get your business moving again?

The key is in the metrics. A clear, granular view of procurement data helps you make the best decisions for company improvement and innovation. 

Before we dive into the details, let’s get a better picture of what you can use and how you can evaluate the performance of your procurement procedure. 

How to measure your procurement process efficiency

It’s tempting to view a few cost savings and discounts as a successful procurement outcome. Of course, saving budget is a key priority for businesses but it isn’t the only measure of efficient procurement. 

Procurement KPIs (key performance indicators) are business-specific data and feedback markers. KPIs prevent you from drowning in data and missing vital opportunities for value. 

KPIs track specific procurement elements, providing useful feedback on cost, quality, time and risk. This reveals where your procurement strategy is excelling and where it needs developing. 

Your KPIs should reflect your business goals and drive you towards growth and innovation. However, there is a vast volume of data that can be collected. Which indicators are the most important?

Some businesses collect as much as possible. This can lead to analysis paralysis and no time for decisions and action as a result. 

Some focus solely on cost, missing potential in other areas.

Holistic value for your company through efficient procurement is achieved by analyzing a variety of KPIs. Technologies like QR codes can help streamline the tracking of inventory and suppliers, providing real-time data that enhances operational efficiency alongside cost-tracking, staff feedback, and operational evaluations. You can even generate a free QR code to easily track products and suppliers, making the process faster and smoother.

Let’s explore what your business will gain from a data-focused approach.

Why are KPI metrics important?

Picture the scene. Your company has just procured new software and is onboarding employees. It’s been a lengthy process and several projects were delayed as a result. You’re wondering – Why did it take so long?

You could move on, happy that you’re finally onboarding, and keep your fingers crossed that next time will be quicker. 

Or, you could utilize KPI metrics to identify the issue and avoid a repeat event. A quick look at PO cycle time averages over the last quarter, for example, could provide an answer.

Like in any other area of business, tracking KPIs in your procurement procedure brings some benefits including:

• Cost saving opportunities
• Risk management 
• Efficiency improvements
• Productivity increase
• Customer/client satisfaction

But to profit in all of these areas, you need complete procurement visibility. Real-time data and feedback are the keys to evaluating your performance accurately against your targets and industry benchmarks. The result? Smart decision-making. 

For instance, your analysis may expose slow negotiations that don’t yield high discounts. Maybe some internal processes are causing inefficiencies in the procurement cycle, or vendor relationships are poor, resulting in fewer opportunities for innovation. Whatever the problem is, you won’t find it without KPIs.

KPIs transform raw data into actionable improvements. But there’s no universally agreed list. Every business operates in a different sector and has its own aims to fulfill. 

Here, we’ve compiled the most important KPIs for modern SaaS procurement that lead to holistic value gains for your company. 

15 procurement KPIs to track today

Granular insights into operational, staff, cost-saving and supplier KPIs will highlight where your business is building and where it is falling. 

Cost-saving KPIs

If you’re regularly exceeding your procurement budget, the following KPIs will show you where cost is unmanaged. First, identify and then plan improvements to regain control of your budget. 

Spend under management (SUM)

The percentage of procurement that happens with approval from the procurement team and by the correct protocol. 

Measure: Calculate a percentage using the total spend (including unsanctioned purchases) and the total approved spend.

A high percentage represents a solid strategy for cost-optimisation. The SaaS you are purchasing matches your business goals, and vendor relationships are likely strong.

Less than 85% calls for further investigation. The best procurement tools for SMBs can carry out regular audits to identify and eliminate maverick spending and Shadow IT.

Purchase price variance (PPV)

The difference between what a company expects to pay for an app and the actual price. 

Measure: Subtract the actual price from the estimated value. 

A consistently low PPV suggests that your procurement team or negotiators aren’t securing significant discounts. Perhaps they don’t have enough leverage to right-size their required services, resulting in cost waste. 

Positive PPV results should be celebrated. They indicate effective negotiating and profitable agreements. And if you don’t have a master negotiator in-house, engaging external experts is well worth doing.

Cost avoidance 

The strategic measures used to maintain expenditure levels.

Measure:  Estimate the potential cost incurred with no strategic management in place and subtract the price of a solution (for example, investing in procurement management software).

Your potential cost will include fines for data breaches, risk threats, software outages and repairs and wasted storage or features. 

There will likely be a sizable gap if you’re implementing best practices for procurement management, including nurturing vendor relationships. 

Procurement return on investment (ROI)

The overall profitability and cost-savings of your procurement process. 

Measure: Calculate the ratio of your annual cost savings to your internal yearly procurement costs. 

This value highlights whether your process saves you cost, equals out, or drains your budget. It’s a more general view of whether procurement is working, but you’ll also have to consider soft cost savings, such as cost avoidance, for a better understanding of exactly where the issues lie. 

Supplier KPIs

Vendors are external parties so keep a keen eye on the following metrics to achieve the highest possible value for your company. 

Supplier lead time

How long it takes for a vendor to supply an order after receiving it. 

Measure: Find the difference between the PO acceptance date and the onboarding date. 

If you’re waiting to launch vital, new software for more than two months, your supplier isn’t proactive. Does this pattern recur across your vendor inventory? Then it’s time to research and source new vendors. 

Supply defect rate

The number of substandard features within apps.

Measure: Divide the total number of defective features by the total number of features present in your subscription. 

Where the defect rate is high, risk management is ineffective. Vendors haven’t received enough scrutiny before purchases were made. Reflect on the following questions: Are customer reviews utilized as part of our procurement process? Do we do enough research into vendor reputation?

Compliance rate

How well suppliers are meeting the requirements and SLAs (service level agreements).

Measure: Calculate the difference between met and unmet agreements. 

This KPI reveals how well your SaaS suppliers are aligned with contracted terms such as prices, response times, features and updates. If this is low, employees may feel as if the software doesn’t match their demands, leading to maverick spending. Early identification eliminates risky Shadow IT in your SaaS stack. 

Vendor availability

How well vendors meet arising needs for your company.

Measure: Find the ratio of the number of times when vendors were quickly available to the total number of queries raised. 

Your business needs will change as you grow and responding swiftly to economic and industry developments is important. A low ratio indicates reliable vendors who deserve your repeat business. 

PO and invoice accuracy

Whether vendors deliver the right services at the right time. 

Measure: Calculate the percentage of purchase orders that were fulfilled as issued to the total number of purchase orders. 

You’ll need to include features, prices, quantities and delivery dates in your assessment of PO fulfillment. It’s good practice to evaluate this KPI over a period of time.

A low percentage could mean cost wastage and an increase in extra operational outlay.  

Supplier quality rating

The performance and reliability of the service and supplier relations.

Measure: Accumulate feedback from each of the key areas above, add customer service feedback from employees and rate suppliers out of 10. 

This overall rating provides at-a-glance insight when comparing vendors and makes it easier to see which relationships need nurturing or culling. 

Operational KPIs

70% of companies say efficiency gains are the main driver behind implementing procurement software solutions. Efficient operations gain the highest value from your SaaS stack. 

PO cycle time

The time it takes to fulfill a purchase order. 

Measure: Calculate the total time spent on the order from its creation to payment completion. 

This value uncovers your reliable vendors and exposes lengthy approval cycles. Generally, if your cycle time is more than a week, it needs improving. Are approvals getting stuck somewhere?

Rate of emergency purchases

How often your company needs to make an urgent purchase. 

Measure: Find the ratio of emergency purchases to the total number of purchases over a fixed period. 

A high ratio of emergency purchases is a red flag. Your procurement plans and processes aren’t working effectively if departments need to fast-track many software orders. Hasty purchases result in missed discounts, reduced right-sizing opportunities and high costs. 

Number of approved suppliers

A vendor inventory is your first port of call when investigating a new software need. 

If you have a low number of long-standing suppliers that are slow to move with modern developments, business stagnation is inevitable. On the other hand, too many suppliers reduce the possibility of bundled service discounts and make relationship management trickier. Get the balance right for cost optimization. 

Staff KPIs

Number of contracts managed per employee

Procurement software allows you to designate ownership of purchases to specific employees. Whilst this is a win for accountability and management, it’s important not to overload employees with too many contracts. Employees should be productive and challenged, not burnt out. 

Number of training hours per employee

Balance is key in training, too. Software that requires long training periods or onboarding sequences can interrupt important tasks and bust deadlines. This metric also shows whether training is invested in the correct departments, or if it is negatively skewed towards an unnecessary area. 

If you’re committed to sustainability and corporate social responsibility, you may also consider metrics such as the environmental impact of your vendors. Additionally, diversity metrics, e.g. minority-owned enterprises, can be insightful to broaden your horizons and embrace different perspectives for business innovation. 

Now you’ve noted your key procurement KPIs, you’re left with the big ‘How?’ question. How can you analyze so many metrics and save your time and energy in the process?