Organizational development > procurement operations metrics beyond savings

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    • #307496
      Mary Zampino
      Keymaster

      This SIG Member from the buy-side is seeking strategies for measuring procurement operational success, beyond the more typical metrics such as savings, cost avoidance, spend under management and so on.

      For example, how do we measure how Procurement

      • supports risk management
      • enables CSR, ESG, DEI goals

      Please reply here with any strategies, concepts, thought leadership, etc.

    • #307524
      Jeff Sawyer
      Participant

      Beyond the typical like cycle times, negotiated costs, etc……

      Number of proposers and variance of proposal qualities and costs:  The better the solicitation the better the proposals and costs and the greater likelihood that high performing vendors will propose.  Research has shown the the high performers are the most likely NOT to propose, especially to a poor solicitation or who they perceive as a bad client.  Measuring these items are a reflection of procurement and the requestor/end-user involved in the solicitation.  Most would agree that more competition (more proposals) is a good thing, as such the data associated with that is a reflection on the quality of procurement.

      The quality of SOWs coming from the requestors/end-users: Procurement can help bring value to their internal clients by training on SOWs, and assisting them to make them better.  We may not be SMEs on what we are buying, but we are SMEs in SOWs.  You can benchmark past quality and then measure quality following increases in approaches to training and culture in working with the internal clients.

      Comparison of costs at contract date to final costs:  Procurement is often patted on the back for negotiating and hiring at the lowest initial cost.  In many purchasing sectors that is not the final cost.  The final cost is typically borne by the end-user in terms of paying more (change orders) and having to manage more (FTE and “Pain” costs) with lower performing vendors.  Procurement is just a point in time in the middle of a purchase, measuring or rewarding them at that time is not equitable to the entire delivery team.

      Measuring of goals (DEI, ESG, etc.) is a slippery slope:  As in the comment above, those measurements at time of procurement may or may not be accurate at that point in time (related comments in early item).  Careful use of the measurements should be made so as to not draw too broad of conclusions.  Measurement of specific responses within proposals (benchmark the past and measure the new requirements) will show that you are attracting vendors responses, but does not determine the reality of their action.  The trick is tying them to some value.  Example: some public entities have min. participation requirements for subcontractors (longer discussion avoided here on the appropriateness).  In a recent study I conducted, we showed that an entity was paying a premium of about 30% on that requirement (those subs cost 30% more on the project).  This is likely not reflective on most delivery of services, and certainly doesn’t take into account other benefits……   It is what it is, but at least someone now can consider that when determining if the benefits come at an acceptable cost.

      Negotiations, Risk Management and Collaboration/Trust during service delivery:  During the negotiation/getting to contract phase, we are driven by the “what ifs” and the worst case scenarios (risk management) to protect ourselves.  Both sides of the contract are so focused on the worst case or protecting itself, we forget, once this phase is done, we have to come together and work to hand in hand.  Collaboration and trust is greatly harmed in the negotiation and contracting process, even though we all know that those things are a key component of getting a good service or project.  We certainly need to rethink how we do both, and until then we should measure some of this so we know what is going on.  Simple qualitative metrics can be compiled on the negotiation process (divisiveness, happiness in various factors, etc.) along with qualitative measure (like time).  Once the vendor begins work, we can measure trust and collaboration qualitatively from the people involved.  A comparison of these items are a reflection of the whole team, as procurement, it will give us some information that may help us grow a better negotiation process.

    • #307572
      Mary Zampino
      Keymaster

      Posted anonymously on behalf of SIG Member

      Revenue generation opportunities

      Waste reduction

      Reduced time to market

      Innovation opportunities

      Brand enhancement

      Partnering opportunities

      Reduction in risk

      Reliability improvement

      CSR/Sustainability compliance/targets/questionnaires

      • This reply was modified 1 month, 3 weeks ago by Mary Zampino.
    • #307573
      Mary Zampino
      Keymaster

      Posted anonymously on behalf of SIG Member

      We have a process goal around DE&I suppliers. Essentially, we measure our ‘batting average’ on researching and consulting with our DE&I supplier management team before competitive sourcing events. Our goal is to research and (if applicable) propose potential DE&I suppliers in at least 90% of competitive sourcing events.

      Following this process and hitting that metric has led to the discovery of new, highly qualified diverse suppliers. Some have also been awarded new business.

    • #307574
      Mary Zampino
      Keymaster

      Posted anonymously on behalf of SIG Member

      A couple come to mind at a high-level

      • ROI
      • Savings rate
      • % of addressable spend influenced

      On a more transactional level

      • eInvoicing rate
      • % of invoice / spend PO backed
      • % of invoice / spend contract backed

       

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