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4 KPIs That Define Procurement Success

In the evolving field of procurement, staying ahead of the curve means not only adopting best practices but also measuring success effectively.  Measuring success effectively helps organizations find opportunities to reduce costs, increase efficiency and make better decisions. 


Key Performance Indicators

In a recent discussion, Marisa Brown, Senior Principal Research Lead for Supply Chain Management at APQC, emphasized how organizations benefit from using performance measures. 


“One of the things we find is that organizations that use performance measures are better able to discover opportunities to reduce their costs.  We also find that using benchmarks to compare their performance often helps organizations identify gaps, improve performance and make more informed decisions.” – Marisa Brown

She also outlined the Key Performance Indicator (KPI) framework that APQC recommends and four high level KPIs they think are essential.


KPI framework


As organizations look at their KPIs, it is important that they think about measuring and monitoring a balanced set of KPIs.  A balanced set of KPIs should include measures for input, activity, output and outcome or impact for a given process.  They should also include measures for cost effectiveness, staff productivity, process efficiency and cycle time.


Essential high level KPIs


The following high level KPIs are essential for measuring procurement performance and identifying areas for improvement.


1. Total Cost to Perform the Procurement Process Group


At its core, procurement has historically been about managing costs while ensuring quality and reliability. The first KPI centers on the total cost to perform procurement, a comprehensive metric encompassing personnel, systems, overhead, outsourcing, and other operational costs.


  • Why It Matters: Total cost reflects the efficiency of a procurement process. By understanding and comparing these costs, organizations can identify inefficiencies and benchmark performance against peers.


  • Normalization for Comparability: When comparing to benchmarks, it is important to use a common denominator, such as cost per $1,000 in revenue. This ensures fair comparisons across organizations of varying sizes.


  • Benchmark Insights: The cost to perform the procurement process group is more than three times higher for the bottom 25% performers as it is for the top 25% performers, $8.67 compared to $2.82 per $1,000 in revenue. 


2. Cycle Time to Place a Purchase Order


Efficiency in procurement often hinges on speed. The cycle time to place a purchase order measures the time taken from receiving a purchase requisition to releasing the purchase order to the supplier.


  • Why It Matters: Long cycle times can hinder operations, delay project timelines, and increase costs. This metric helps organizations identify bottlenecks and streamline processes.


  • Goods vs. Services: Cycle times can vary between goods and services. It is often faster to procure services than to purchase goods, which require detailed specifications and compliance checks.


  • Benchmark Insights: The cycle time to place a purchase order for goods is 2.5 days for the bottom 25% performers compared to 1.0 days for the top 25% performers.  The cycle time to place a purchase order for services is 1.5 days for the bottom 25% performers compared to 1.0 days for the top 25% performers. 


3. Percentage of Purchase Orders Approved Electronically


The percentage of purchase orders approved electronically serves as a proxy for the level of automation in a procurement process. 


  • Why It Matters: Manual approvals introduce delays and errors, especially as organizations grow in size and complexity. Increasing automation helps procurement teams focus on strategic tasks rather than administrative ones.


  • Benefits Beyond Speed: Beyond cycle time, electronic approvals reduce redundancies, minimize the risk of errors, and enhance data accuracy. This, in turn, allows procurement teams to make better-informed decisions and maintain compliance.


  • Benchmark Insights: The percentage of purchase orders approved electronically is 69% for bottom 25% performers compared to 90% for top 25% performers. 


4. Purchase Orders Processed Per Procurement Employee


Measuring the number of purchase orders processed per procurement employee highlights the productivity and scalability of a procurement team.


  • Why It Matters: This KPI evaluates how efficiently an organization uses its resources. High-performing procurement teams handle significantly more purchase orders per FTE, reflecting their streamlined processes and effective use of technology.


  • Normalization for Accuracy: Using FTEs rather than headcount to account for part-time employees and variations in workload distribution ensures an accurate comparison of productivity levels across organizations.


  • Benchmark Insights: The top 25% performers process more than four times as many purchase orders per procurement FTE as the bottom 25% performers, 1,461 compared to 333. 


Integrating the Four KPIs into a Balanced Framework


While each KPI offers valuable insights, their true power lies in their integration within a balanced performance measurement framework. A comprehensive approach that combines cost, efficiency, quality, and productivity metrics provides a holistic view of procurement performance.


“We know that what gets measured is what matters.  When they are looking at their KPIs, it’s important that organizations really think about measuring and monitoring a balanced set of KPIs.  For example, you have to look at quality measures along with efficiency measures to ensure that the drive for speed doesn’t yield an increase in errors.” – Marisa Brown

By leveraging these KPIs together, organizations can identify specific areas for improvement while maintaining alignment with broader business objectives.


The Role of Technology in Driving KPI Performance


Automation plays a critical role in helping organizations achieve their goals. Whether it’s electronic approvals, automated spend analysis, or integrated data systems, technology enables procurement teams to achieve higher levels of efficiency and accuracy.


To get the most out of automation, organizations must first address any foundational issues, including problems with process structures, how master data is managed and governance over processes and data.  If organizations do not address foundational issues, automation will not result in better performance.


“You want to make sure you are tackling the fundamentals before you automate a process.  If you automate a bad process, all you get is a faster bad process.” - Marisa Brown

A Roadmap for Procurement Excellence


The four KPIs outlined by Brown serve as essential benchmarks for procurement success. Together, they provide a roadmap for organizations to improve efficiency, reduce costs, and enhance overall performance.


For procurement leaders, the challenge lies not only in tracking these metrics but also in leveraging the insights they provide. By adopting a balanced approach, embracing automation, and addressing inefficiencies, they can position their teams as strategic champions of growth and innovation.


As Brown’s research highlights, success in procurement is not just about managing transactions, it’s about driving value across the organization.


About Marisa Brown


Marisa has more than 25 years of experience in business, research, writing, speaking, and consulting. She leads APQC’s supply chain team that conducts research to provide insights into benchmarks, best practices, and process improvements across the supply chain, currently focusing on supply chain planning, procurement, and supplier relationships. Marisa creates and publishes informative content on APQC’s Knowledge Base, the APQC blog, and third-party sites.


Data in this article was accurate at the time of publication.  For the most current data, visit www.apqc.org.




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