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 partitioning the performance indicators by ProcureTech module as well as indicating a few more you should be asking for. We’ve covered the core Source-to-Contract modules, and today we are concluding with the Procure to Pay Modules of e-Procurement and Invoice to Pay (Accounts Payable).

e-Procurement

Tanya Wade’s Performance KPIs

• Supplier Performance:Supplier Lead Time
• Compliance & Risk:PO Compliance
• Operational Efficiency:Procurement Cycle Time
• Operational Efficiency:Automation Rate
• Spend Analysis:Tail Spend

For details on these, see our prior series.

Key Module KPIs

• Compliance & Risk:Maverick Spend Reduction – maverick spend is out of control in most organizations without good (e-)Procurement systems; it is important to know what is the average improvement from implementing the provider’s system (no matter what metrics the vendor throws at you, if this isn’t substantially increasing, the system is NOT being adopted)
• Compliance & Risk:Preferred Supplier Spend (Improvement) – how much of the off-contract spend is with preferred suppliers, and by what percentage is preferred supplier spend expected to increase
• Compliance & Risk:Avg Improvement/Time-to-Value in Discount/Rebate Acknowledgement – many traditional savings in office suppliers / MRO are offered in the form of rebates if a volume is hit (because the provider knows it won’t be because all organizations without good e-Procurement/Contract Management have high levels of maverick spend and they know they can often substitute SKUS due to “temporary stockout” and the buyer won’t notice and this will help ensure that the volume is not hit)
• Operational Efficiency:Automated Inventory Re-Order % – for regular inventory/MRO restocks or predictable volumes based on the manufacturing plan, the e-Procurement system should be able to submit the POs automatically
• Operational Efficiency:Repeat Order Cycle Time Reduction – for standard orders such as employee onboarding kits, monthly storeroom re-orders where the amounts need to be human verified/input, etc., on average, how much faster can these be placed vs. pre-module implementation
• Operational Efficiency:Quick-RFP / RFQ % Reduction – by what percentage does the e-Procurement system, with its integrated catalog and quote management functionality, reduce the percentage of quick RFP/RFQs that the organization needs to issue for non-strategic purchases
• Operational Efficiency:% (Increase) Spend on PO – by what percentage is on-PO spend increased

e-Procurement is all about getting Spend Under Management, ensuring contracts and included pricing are adhered to, and using preferred suppliers (and products) as much as possible (to help with standardization). This requires making it easy for requisitioners/buyers to find what they need, buyers to issue POs, and on-contract/preferred supplier spend to be easily tracked. Metrics should be in place to make sure all of this happens.

Invoice-to-Pay / Accounts Payable

Tanya Wade’s Performance KPIs

• Operational Efficiency:Procurement Cycle Time
• Operational Efficiency:Automation Rate

For details on these, see our prior series.

Key Module KPIs

• Operational Efficiency:Invoice Cycle Time Reduction – by how much, on average, do clients see invoice cycle time reductions
• Operational Efficiency:Straight Through Processing Percentage – what percentage of invoices are able to be processed straight through (with m-way match) without human interverntion
• Operational Efficiency:Average Dispute Resolution Time (Improvement) – what is the average dispute resolution time in the platform and what is the improvement over the average time reduction versus pre-system implementation
• Operational Efficiency:Early Payment Discount Opportunity Improvement – percentage-wise, how many more invoices eligible for early payment discounts can now be paid early (that couldn’t before due to processing delays), allowing organizations to improve their working capital management

Invoice to Pay is all about invoice processing automation and minimizing the amount of time that a human needs to manually review invoices for completeness and correctness and (automated) payment according to pre-defined terms. Make sure the metrics you choose reflect this.

We don’t claim this is a complete list, or every KPI that you can, and possibly should, ask for, just that if you are non-technical, and can’t judge a solution on its technical merits, if you can at least get these KPIs and force the vendor to prove them to you, then you will at least get a solution that is bound to provide you with some improvement and that, because of the real improvement potential, may actually be used.

The best solution is to hire an independent third party who is an expert in ProcureTech and who has no stake in any provider or implementer and is solely interested in doing Project Assurance for you, but if you can’t get that, at least get something which has a history of delivering measurable value to similar organizations.

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.

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.