If you won’t admit your TQ (Technical Quotient) is rock-bottom, you won’t spend (or aren’t allowed to spend) budget on an outside expert focussed on Project Assurance, and decide to go ahead with selecting your own ProcureTech solution, then you should make a point to focus your selection around your best practice KPIs. First of all, your management will be happy if you improve against them. Secondly, some of the best KPIs actually require you to have good platforms in place if you are to improve against them.

To demonstrate this, in our first two installments, we began, and continued, a discussion of the 21 Key Performance Indicators (KPIs) for Procurement that Tanya Wade shared because they are a good starting point (as you don’t want too many KPIs as THE REVELATOR pointed out in his analysis). Today, we’re going to continue with the final 7 KPIs, addressing the remainder of the 21 KPIs outlined by Tanya.

Category & Spend Analytics

   Top All Spend Categories

Your top spend categories are not static, and nor are your top savings opportunities, as those are a subset of the top categories NOT currently under management — and that’s what you care about. This necessitates a great spend analysis solution that tracks spend in real time and allows you to track your top categories, filter those out not under contract/management, analyze price variance/market price to find your top opportunities, and then you can pursue those for opportunities.

   (Top) Maverick Spend Categories

Building on all spend categories, this focusses on the categories for which there are contracts, and are classified as “under management”, but where there is a lot of maverick spend that is costing the organization money and even customer of choice reputation with key suppliers. This requires a great e-procurement system that tracks all the spend and a great spend analysis system that analyzes the spend against the contractual requirements.

   Tail Spend

Tail spend might sound insignificant, if it’s only 30% of the spend, but the reality is that, because it is completely unmanaged, the average over spend across categories is 15% to 30%, which gives a savings potential of 4.5% to 6.0% on the spend vs maybe an average overspend of 5% on the upper spend categories that are partially to fully managed (without strategic sourcing decision optimization and advanced analytics) for a savings potential of maybe 3%. Thus, an e-Procurement solution that tracks and manages tail spend is absolutely crucial to spend under management, cost savings, and (future) cost avoidance.

Sustainability & Diversity

   Diverse Supplier Spend

This may not mean a damn thing in the “anti-woke” USA, and even be a turn-off to those white-skinned men related to the boss who acquire their position based on “merit”, but in most countries in the world, especially where there are government programs and incentives for diverse suppliers, where diversity actually improves your brand value, and where people are smart enough to realize that diverse views can actually bring ideas you wouldn’t have thought of into your supply chain, the ability to track and measure (but NOT mandate) this matters. This requires a good supplier management platform with deep profiles and the ability to correlate performance with innovation so buying organizations can determine the right level of diversity to have in their supply chain.

   Sustainable Spend

Again, while this may not mean a damn thing to American C-Suites with the American Federal Government rolling back environmental legislation to the early modern era to the point that Sourcing Innovation had to pen a piece on the Chief Sustainability Officer: USA Edition, this is very important in Europe and the Rest of the Developing/Developed world which has, and is continuing to introduce, environmental legislation and critically important to anyone with enough forward thinking to realize that the production of goods and services that require scarce and dwindling non-renewable resources, too much energy, or too much freshwater is coming to end due to shortages of raw materials, energy, and freshwater globally and sustainability is the key to corporate survival. Thus, a GHG, carbon, energy, and (fresh) water tracking solution, either as part of the supplier management or analytics platform, is becoming key to sustainable (and continually profitable) sourcing and procurement.

Innovation & Collaboration

   Joint Supplier Projects

You need the ability to create, manage, track, and report on projects that require supplier innovation/joint supplier development, especially in direct supply chain as this is critical to gaining, and maintaining, an edge in an ever-evolving marketplace. Suppliers will often hear of new techniques and production technologies and options before you will. Plus, you want them to be figuring out how to give you the best product at the best quality and the best price, otherwise, why are they your strategic supplier? This will require a great supplier onboarding, collaboration, development, and management platform.

   Idea Implementation Rate

You need the ability to not only track the number of ideas a supplier submits for quality, delivery time, or cost improvement, but how many are determined to have potential and how many ultimately get realized. This is important for two reasons. One, you want your suppliers to be helping you improve over time. Two, you want to focus on strategic relationships with suppliers that give you workable ideas you can use and do use over time. This also require a great supplier onboarding, collaboration, development, and management platform.

In other words, all of these KPIs require not only good solutions to track them, but great solutions to improve them. While these KPIs don’t necessarily dictate the full, appropriate, breadth of Source-to-Pay tech that you should have (because the sourcing and contract management platforms could be minimal to non-existent, etc.), they do provide a way to help you judge the appropriateness of a vendor if you can’t effectively judge the underlying technologies.

When looking for new ProcureTech software, simply include ALL of your Procurement KPIs in your RFP and require that the vendor’s response:

• indicate which KPIs it will improve,
• by how much it expects to improve those KPIs based on other customers usage and experience, and
• describe in detail how its solution will enable you to realize those improvements it is promising

while also requiring that the demo include an actual demonstration of the solution performing all of the indicated workflows and functions necessary to achieve the KPIs it promises. This will be much more appropriate than their typical bells-and-whistles show that, as per our recent series, looks great but, in actuality, is quite useless as those bells and whistles in the demo turn out to be cells and thistles in production.