Top metrics to analyze performance from a procurement control tower
In previous blogs in our procurement-focused series, we introduced the importance of multi-enterprise collaboration via a procurement control tower (PCT) to give all stakeholders a view into the performance of the supply chain.
With a PCT, internal and external roles can see exactly how things are progressing in each discipline to inform better decisions, more resilience, and agile pivots to optimize success.
Traditionally, supply chain metrics can be somewhat nebulous. Supply chain leaders may find themselves relying on gut feelings to make decisions, but with the supply chain as disordered as it is, gut feelings simply won’t cut it. Instead, use these real KPIs to inform supply chain operations along the entire chain, from external suppliers to internal managers.
Use data to shift the subjective to objective
There is no longer any room to be uncertain. With supply chain disruption, skyrocketing freight costs, and shortages, KPIs need to be concrete, trackable, and visible to all stakeholders. It’s time to move away from intuitive analysis. These metrics provide support for all planning initiatives across the whole organization. It’s simply a fact that gut feelings don’t translate and not documentable. Using key KPIs, you can speak the language of all stakeholders because they’re metrics everyone should understand. If you use a platform like Anaplan, this data can be funneled in to inform other success indicators for both external and internal partners.
Having concrete metrics, especially when in a comprehensive platform like Anaplan, enables stakeholders to continually optimize. This can be swift identification of areas of both improvement and risk, pinpointing of ways to improve performance, and mobilization of multi-enterprise collaboration to identify partners with strengths and weaknesses.
What are these metrics and how can they be used?
The metrics that matter for suppliers
These are the crucial metrics to track to ensure optimal performance and alignment with the organizational strategic and financial plan.
- Plan/order to provision/deploy cycle-time: How long does it take to begin and complete an order? The main indicators to analyze this include supplier performance and spend. Also important are the amount of cost savings and managed risks. Looking at all these factors combined give a sourcing manager the information they need to contribute to the overall performance analysis.
- On-time delivery: This gives insight into the accuracy of forecasts and the number of errors and omissions occurring on orders. These data points are important for demand planners when managing spend and when doing integrated business planning, as well as orders of safety stock and buffer management.
- Perfect orders: Understanding how long it takes to schedule and close purchase orders (POs) can give supply managers the info they need to manage orders, backlogs, supply, and allocation. Making this metric a must-have for master scheduling is also key for that role.
- Capacity plan accuracy: Understanding how much lead-time a PO needs, how often orders are delivered on time, and what the purchase price variance is gives buyers a suite of accurate information to use.
- Field failure rate: New product project managers need to understand how often the supply chain fails to meet a new product’s introduction schedule. How frequently products are on time or are late, is a key indicator of risks or the need for optimization.
Don’t forget to measure your internal performance
Suppliers and external partners aren’t the only parties in a multi-enterprise collaboration. The PCT can orchestrate performance both externally and internally for maximum results. It’s equally important to measure the efficacy of the procurement staff of the organization as it is to measure the performance of suppliers. Keep the following metrics in mind when evaluating internal staff:
- Cost per and time to PO: How much does it cost to originate a PO, and how long does it take to get a PO? Tracking these allows leaders to identify areas of both risk and opportunity.
- Headcount to spend: If the amount of headcount is contributing to excess spend, this metric helps workforce planners make the right decisions to achieve the desired financial results. If additional spend exists and other metrics indicate opportunities to increase volume or improve margin, this is also a good opportunity to identify where more personnel can make the most impact.
- Spend management: The cost of products and services from the organizational budget is integral to determining where there are places to increase or decrease spending. With visibility across internal and external stakeholders using Anaplan, it’s possible to identify which departments or leaders are over-, under-, or adequately spending.
- Cost savings: The amount of money being saved cross-departmentally is an important indicator of success. Identifying and capitalizing on opportunities to spend less is any business’s objective, but supply chain leaders’ ability to maximize partnerships, minimize superfluous spending, and overall reduce costs wherever possible is certainly a KPI.
- Plan budget and actuals: One of the most obvious and most important indicators of adequate performance is adherence to the planned budget. If data indicates a variance in actuals from the budget, there is either a problem to solve or an opportunity to seize. This is another area for which Anaplan is key to multi-enterprise collaboration, because with a PCT watching performance, it’s possible to quickly and effectively find those areas of risk and opportunity to balance (or improve) actuals against the budget.
Decisions by gut feelings are a thing of the past. With the dearth of data available to supply chain leaders both from external and internal sources, measurements are necessary – if not crucial – for optimal performance. Using multi-enterprise collaboration and a centralized PCT, these metrics can be analyzed and decisions can be made with confidence and agility when necessary. Anaplan is a tool perfectly suited to do just that, including modeling various scenarios against different KPIs, making Anaplan the right choice for procurement leaders striving to uncover cost saving and de-risk their decisions.