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 are partitioning the performance indicators by ProcureTech module as well as indicating a few more you should be asking for. In the first part, we addressed Spend Analysis and (e-)Sourcing. In this part, we are tackling supplier management and contract management.

Supplier Management

Tanya Wade’s Performance KPIs

• Supplier Performance:On-Time Delivery
• Supplier Performance:Supplier Fill Rate
• Supplier Performance:Supplier Defect Rate
• Supplier Performance:Supplier Rating
• Compliance & Risk:Supply Base Risk
• Compliance & Risk:% of Audited Suppliers
• Sustainability & Diversity:Diverse Supplier Spend
• Sustainability & Diversity:Sustainable Spend
• Innovation and Collaboration:Joint Supplier Projects
• Innovation and Collaboration:Idea Implementation Rate

For details on these, see our prior series.

Key Module KPIs

• Supplier Onboarding:Average Onboarding Time – how long does it take to onboard a new supplier in the system; if you can’t get the suppliers in the system, it’s not very useful
• Supplier Onboarding:Average Onboarding Approvals – on average, how many approvals are needed to onboard a supplier – every approval slows down the process, so they should be minimized and optimized
• Supplier Onboarding:% Supplier Data Pre-populated – how much data is the provider able to import, on average, from existing systems and third party feeds to minimize the effort required by the supplier and the onboarding time
• Supplier Onboarding:Average Supplier Data Accuracy – how accurate is the data that is used to initialize the system, i.e., on average, how much data has to be corrected
• Supplier Discovery:Qualified Supplier Network Size (By Industry) – how many suppliers that the organization could reasonably use are in the supplier’s network; many companies will claim millions of suppliers because they index every single business in a geography, but (corner) drug stores, grocery stores, pizza shops, restaurants, corner stores, department stores, etc. etc. etc. are NOT suppliers you can use even if they are technically in the same vertical (pharma, food and beverage, CPG, etc.)
• Supplier Discovery:Average Supply Base Net Change – after implementing and using the solution for a year, what percentage of suppliers, on average, are new in an organization’s supply base

Supplier Management is about the supplier lifecycle:

• on-boarding,
• buying,
• managing,
• developing, and
• off-boarding.

As a result, it’s key that you have metrics that can gauge the efficiency of each stage of the supplier lifecycle until a supplier is deactivated and fully off-boarded.

Contract Management

Tanya Wade’s Performance KPIs

• Compliance & Risk:Contract Compliance

For details on these, see our prior series.

Key Module KPIs

• Contract Negotiation:Avg Cycle Time – what is the average time to negotiate and sign a contract in the system
• Contract Negotiation:Avg Cycle Time Improvement – what improvement did the system bring relative to pre system contract cycle times
• Compliance & Risk:Avg Negotiated Price Compliance Increase – what improvement is there in negotiated prices being realized on invoices as a result of the module implementation
• Compliance & Risk:Evergreen Renewal Reduction – what percentage of (overlooked) evergreen renewals are eliminated with the module
• Compliance & Risk:Contract Risk Score – can the system track risk scores by contract, category, supplier, and the organization
• Contract Management:Contract Renewal Rate Change – what percentage of contracts are renewed in the system and what is the average (percentage) change vs. pre-system
• Compliance & Risk:Obligation Rate Improvement – contract compliance is too broad, and might only measure if the contract was ultimately fulfilled; a good contract management system facilitates execution management at the milestone and associated deliverable level and tracks the rate of (on-time) milestone fulfillment to ensure contracts are managed effectively from the date of signing to the final deliverable, which could be years down the road

Contract Lifecycle Management (CLM) has three key stages:

• negotiation and signing,
• execution management (and compliance), and
• renewal or termination.

Make sure you have metrics that measure the key processes and targeted results at each stage, or you’ll end up buying a very pricey, seldom used, virtual filing cabinet where contracts are stuffed and forgotten.

In our third and final part of this (initial) mini-series, we will tackle the last two primary modules of Source to Pay, the Procure to Pay Modules of e-Procurement and Invoice-to-Pay.