Procurement Trend #09. New KPIs

Only six sinsational anti-trends to go. That means we’ll reach the end of this series in two weeks. We should be all happy, happy, joy, joy! But how can one be joyful when one realizes that this means we had to slog through a two-four of anti-trends to get here, and that some of us probably had to drink a two-four in the process to keep the dark thoughts at bay! And, to be honest, the doctor is really worried that there is no skin left on the futurists’ drum (which has taken more of a beating than any drum set Neal Pert has ever owned) and that, giving their predilection for ancient trends, these futurist historians may try to skin LOLCat to give their drum new life.

So why do these funky* futurists keep trying to push new KPIs as a future trend? Is it because of their fondness for three-letter acronyms that stems from their party-hardy frat-days (filled with a little too much beer pong)? the doctor has his suspicions, but it’s probably because they finally figured out that:

  • what gets measured gets managed is still true

    and KPIs require measurements

  • new processes and new technologies mandate new measures

    so KPIs need to be updated whenever a new process or technology is brought in, which should be a regular occurrence in a best-in-class Supply Management organization that makes an effort to keep up with the times

  • new measures provide new opportunities for improvement

    just like new Intel cores have provided new opportunities for faster computation ever since it was all about the pentiums

Measure to Manage

If the only reason that you are measuring spend, year-over-year changes, and captured savings is to report those metrics at the monthly meeting, then you are doing it all wrong. If you are not using base measurements as a foundation to identify inefficiencies and opportunities for improvement and repeated measurements as the foundation for evaluating progress, then you shouldn’t be measuring in the first place. You’re better off spending your time in old-school hard-nosed negotiations because, at some point, you might actually whip that sales rep so hard that he forgets which way is up and goes under the floor just to escape the verbal onslaught. (Of course, you will create disdain in the supplier who will do the bare minimum to fulfill the contract terms and, if the rep buckled too much, you might even bankrupt the supplier who hopes to make it up on future deals but never does, but hey, at least you got those impossible savings, right?)

Measure to Master

It’s not enough to measure just to track the status and success of current initiatives, you should be measuring with a goal of achieving mastery. If the benchmark for the average throughput in your industry is 100 invoices/day/clerk, then you should be striving to get your exception-based invoice automation process to 100/day/clerk error-free invoices and nothing less should do. If you don’t get there in the projected amount of time, you should be introducing new measures that break down, or influence, the process flow such as resolution time per exception invoice, average buyer response time per clerk contact, average number of line items on a problem invoice, etc. until you figure out where the slow-down is and what you should do about it. (Automatically reduce exceptions by kicking invoices back to suppliers with explanations of errors and do not allow resubmission until corrected, mandated response within 48 hours or a black mark in the buyers’ performance review, break down POs to insure more manageable invoices, etc.)

Measure to Excel

This means not just measuring process, throughput, and savings but finance measures favoured by the C-Suite, even if they do not help Supply Management directly improve performance. At the end of the day, if Finance is happy, the C-Suite is happy, and Supply Management is much more likely to get the financial resources it needs to implement new systems and processes that will ultimately improve the metrics even more.

* and not the good kind of funk