In our last series on Why Your Tech Selection Should be KPI, and not Bell-and-Whistle, Focussed if you are not technical, we reviewed Tanya Wade’s 21 KPIs that are a great start if you’re looking to put some KPIs in place to properly program and percolate procurement. Not all of these were (the most) appropriate for all modules, but if you don’t know your tech, they were a great start.

In this mini-series, we’re going to partition the performance indicators by ProcureTech module as well as indicate a few more you should be asking for (as well as the proof, which, as we all know, is in the pudding, which you cannot eat until they show you their meat, like Pink Floyd told us 46 years ago).

Spend Analysis

Tanya Wade’s Performance KPIs

• Cost Management: (Avg.) Cost Avoidance
• Cost Management: (Avg.) Spend Under Management Improvement (YoY)
• Spend Analysis:All Spend Categories
• Spend Analysis:Maverick Spend Categories
• Spend Analysis:Tail Spend
• Sustainability & Diversity:Diverse Supplier Spend
• Sustainability & Diversity:Sustainable Spend

For details on these, see our prior series.

Key Module KPIs

• Spend Classification:Typical Accuracy – especially if it’s AI-backed/first/powered/etc.
• Spend Classification:Time to Accuracy – this is critical; if it takes 6 months, your tool will be DOA as no one will use it as faith will have been lost after 6 weeks
• Spend Classification:Transactions Per Minute – you need a tool that can not only import new transactions in real time, but build and rebuild spend cubes in real time — the key here is CUBE there is no one CUBE (just like there is no one ring or one ping).
• Cost Management:Year-Over-Year Decrease in Managed Categories – where the organization is spending more than necessary, how much has the organization saved by sourcing/renegotiating identified opportunities
• Operational Efficiency:Total Captured Opportunity per Minute how much spend does the organization save and avoid w.r.t. the time the Procurement team spends building and accessing cubes, views, and filters

Remember, at the core, the entire point of spend analysis is to:

• get your spend in order,
• understand it, and
• find opportunities in it.

So you’re looking for metrics that directly or indirectly measure

• time to get your spend in order at the promised accuracy;
• the efficiency in cube and view construction, updates, and filtering; and
• the value the tool brings.

Sourcing

Tanya Wade’s Performance KPIs

• Cost Management: (Avg.) Negotiated Cost Savings
• Cost Management: (Avg.) Cost Avoidance
• Operational Efficiency:Automation Rate

For details on these, see our prior series.

Key Module KPIs

• Sourcing:Events Per Year – how many events per year are customers pushing though the platform on average
• Sourcing:% Increase in Events Per Year – what percentage increase is this compared to pre-system implementation
• Sourcing:Avg % Savings Identified – what is the average identified savings and, preferably, this statistic is available at the category level
• Supplier Management:Avg % Increase in Invited/Qualified Suppliers – since the tool should allow more suppliers and bids to be considered in events
• Supplier Management:Avg & Increase in Supply Base Diversification – as a result of events flowing through the system

You want a sourcing platform that

• increases the number of events executed by the sourcing team,
• increases the potential supply base you are able to engage, and
• increases the cost savings and avoidance you are able to obtain.

Make sure you have metrics that allow you to gauge how well the modules you have selected will enable you to achieve the outcomes you are searching for.

In Part II we will continue with the primary Source-to-Pay modules of Supplier Management and Contract Management.